Often one of the most confusing and unexpectedly expensive elements of buying a home, stamp duty has long been a sticking point for many buyers – especially in London where property prices can be considerably higher than other parts of the country.
On 8th July 2020, Chancellor Rishi Sunak announced a stamp duty cut for all home buyers, for properties worth up to £500,000 until 31st March 2021 – which he stated means savings for 90% of main home buyers across the UK throughout the next nine months.
But what do these changes mean for you, and how much could you actually save?
We’ve broken down some elements of the new stamp duty rules to help you on your home buying journey, and our Sales Teams are always available to assist further – either by appointment at our newly reopened sales suites, or virtually. We also work with a number of independent mortgage advisors who we will be happy to put you in touch with.
What if I’m a first time buyer?
First time buyers enjoyed certain privileges before the ‘holiday’ was announced, which meant they paid less stamp duty than someone who had previously bought a home – this was to help buyers take their first step onto the property ladder. But a first time buyer will still benefit from the new cuts, as the new holiday extends those savings further.
What if this is my second home?
The ‘holiday’ still applies to you, and you will pay no tax on any home under £500,000, as long as you are selling your current property.
If you are looking to invest in a second or additional home (such as a buy-to-let property), you will also benefit from the ‘holiday’, but will still have to pay the normal second home tax – which is an additional percentage fee, calculated based on the value of the home.
What if the home I’m buying is over £500,000?
Then you’ll still make a big saving. You won’t pay any tax on the first £500,000 – only on the rest of the value. So if your home is £600,000, you will only pay stamp duty on £100,000 of the value, which is a big saving!
What about Shared Ownership homes?
Stamp duty has always worked a little differently with Shared Ownership homes – at the time of purchase, you can opt to pay stamp duty only on the share you purchase, deferring payment on the full value of the home, or you can pay stamp duty on the value of the whole property upfront. A financial advisor will review your personal circumstances and discuss the option that is best for you.
Currently, if the total value of the property is under £500,000, you won’t pay any stamp duty at all. If it is over £500,000, then you could save a large amount of money by paying the full stamp duty owed now – because due to the ‘holiday’, it will be at a lesser rate than usual.
If you chose only to pay stamp duty on the share you purchase, as long as the share you are buying is under £500,000, you won’t pay any stamp duty. However, if you decide to staircase after the ‘holiday’ has ended, you may have to pay stamp duty on the additional amount you are buying, depending on the total market value of your home.
Can I still save if I’m using the Help to Buy scheme?
Yes – homes purchased through the Help to Buy scheme are also included in the stamp duty holiday, provided they are under £500,000. If they are valued over £500,000, you’ll pay a reduced tax on the additional sum.