Back in July 2020, the UK Government made an important announcement relating to stamp duty land tax in an attempt to give the property market a boost, supporting potential buyers who may have been affected financially by the Coronavirus pandemic.
Chancellor, Rishi Sunak, announced that the stamp duty threshold for property sales in England and Northern Ireland would be increased to £500,000 until 31 March 2021.
This big change means that first time buyers, avid sellers or property investors and landlords could benefit from a tax saving of up to £15,000.
What is Stamp Duty?
Stamp duty refers to the tax paid when purchasing a property. In England and Northern Ireland, it’s known as Stamp Duty Land Tax (SDLT), whereas in Wales it is called Land Transaction Tax and in Scotland, it is known as Land and Buildings Transaction Tax.
It is important to note that the changes announced in July regarding the stamp duty holiday only applies to the sale of properties in England and Northern Ireland.
Changes to the Stamp Duty Threshold
Before the announcement was made in July, property purchases would be subject to stamp duty tax on anything over £125,000, or £300,000 for first-time buyers. The stamp duty holiday replaces the limitations previously set and allows for all types of buyers to take advantage of it.
The table below, taken from the GOV.UK website highlights the changes in stamp duty rates which will remain in place until 31 March 2021.
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | Zero |
| The next £425,000 (the portion from £500,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
How Much Money Could I Save?
If you are looking to buy a property for £500,000 or more, you could save £15,000 and fully benefit from the whole of the revised SDLT threshold. If you purchase a property under £500,000 you will not have to pay any stamp duty. The exact amount you will save depends on the agreed price of the property and previous SDLT rates.
An example would be if you purchased a property for the value of £275,000. Under the old rates, you would be subject to paying a stamp duty tax bill of £3,750 but under the revised scheme, you will pay £0.
As each property purchase will be different, we recommended you use the Government’s helpful stamp duty calculator.
What about Second Homes and Investment Properties?
The temporary SDLT rates are primarily aimed at helping first-time buyers and those looking to purchase a main home. This however does not mean that those looking to buy a second home or buy-to-let property cannot benefit.
When looking at the old rules, purchases under £125,000 would be required to pay SDLT of 3% and those between £125,000 and £250,000 pay 5%. Under the temporary rules, the 3% rate applies for all purchases under £500,000. This means there is a potential to save up to £15,000 if you choose to take full advantage of the reduced rates.
The table below, taken from the GOV.UK website highlights the revised stamp duty rates for property purchases falling into this category. Similarly, to before, these rates only last until 31 March 2021.
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | 3% |
| The next £425,000 (the portion from £500,001 to £925,000) | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
| The remaining amount (the portion above £1.5 million) | 15% |
How Can We Help?
This temporary scheme is undoubtedly a great incentive for people looking to buy a new home as well as landlords looking to add to their buy-to-let portfolio. It is also a good opportunity for those looking to sell as so many people are wanting to take advantage of this significant, but temporary change in stamp duty tax relief.
Whether you are looking to buy or sell, our tax team are on hand to help you every step of the way. To discuss your situation in more detail and set up an initial meeting, please get in touch with Chloe Debiaune by calling 01454 619900 or emailing chloe.debiaune@dunkleys.accountants.