Residential Conveyancing: Stamp Duty, what to expect

Monday 13 July 2020

Stamp Duty

The Chancellor, Rishi Sunak, announced on 8 July 2020 that there will be no stamp duty payable on property purchases up to £500,000.

Stamp duty land tax is a tax paid when you purchase a piece of land or property in England or Northern Ireland. Scotland and Wales have their own systems. The tax is paid upon the sale of a property and is paid by the purchaser.

This new tax relief is likely to have far reaching effect and will provide a much needed boost to the property market.

Prior to the Chancellor’s statement, for first time buyers, there was no stamp duty payable unless you purchased a property over £300,000. With this new relief first time buyers will not pay any stamp duty up to £500,000.

For example, if as first time buyers you purchased a property for £400,000, you would previously pay stamp duty of:

• £0.00 for the first sum up to £300,000; and
• circa £5,000 at a rate of 5% for the sum between £300,001 and £500,000.

With the new announcement you will save circa £5,000.

The new announcement also applies to those moving homes. Previously you would pay stamp duty at a rate of 2% for any sums falling above £125,001 and up to £250,000 and 5% for any sum falling between £250,001 and £925,000. You now can move forward with your plans with the comfort of knowing you are relieved from paying stamp duty on purchases of up to £500,000.

Using the same example as above, if you purchase a property for £400,000 you would previously pay stamp duty of:

• £0.00 for the first £125,000;
• circa £2,500 for the starting rate of 2% between £125,001 and £250,000; and
• circa £8,000 for the next rate of 5% between £250,001 and £400,000.

You will now benefit form a total saving of circa £10,500 as the starting rate is now 5% above £500,000 and up to £925,000.

This change will also apply to second homes and additional properties. Whilst, the surcharge of 3% will remain and continue to apply, buying property will now also become more attractive for landlords.

Previously, a landlord purchasing a property at £400,000 would pay stamp duty as follows:

• 3% up to £125,000 equating to £3,750;
• 5% between £125,001 and £250,000 equating to circa £6,250; and
• 8% between £250,001 and £925,000. (In a purchase of £400,000 the sum applicable in this band would be circa £12,000)

The sum payable would therefore be circa £22,000. Following the new announcement, the starting rate of 3% will apply to the first sum up to £500,000 thereby reducing the stamp duty payable to circa £12,000. A saving of circa £10,000.

The new relief is in effect until 31 March 2021. For further information and HMRC’s guidance please visit this link. The link also provides access to HMRC’s stamp duty land tax calculator, which will aid you with your plans.

What to expect

As workforce’s start to return and the pandemic eases, we will start to see a gradual increase in economic activity. The Prime Minister and the Chancellor are certainly attempting to boost economic growth. The property market acts as an economic multiplier and so is likely to see increased activity and growth especially with new incentives like stamp duty tax relief and the £2bn Green Homes Grant Scheme.

In amongst this surge of economic activity you may be considering moving homes, buying your first home, or even investing in a second home. At Blacks Solicitors we have the knowledge, expertise and experience to make your journey of selling your property and/or purchasing your new home as seamless as possible.

Coupled with our 4-hour call back promise you will have a direct dial for your single point of contact, known as your Case Handler, who will guide you through the process, support your requirements and answer any queries you may have. We aim to provide you with a personable and efficient service.

We continue to help clients achieve their objectives even whilst in lockdown and working from home. You can find feedback from our clients on Trust Pilot.

If you have any questions concerning the new stamp duty rules and/or you wish to discuss your move, please do not hesitate to contact a member of our specialist Residential Conveyancing Team.