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Posts tagged "stamp duty"

When does the stamp duty holiday end?

The chancellor's policy of suspending of stamp duty on the first £500,000 of all property sales in England and Northern Ireland has helped boost house prices.

August saw the highest monthly price rise in more than 16 years, says the Nationwide. It describes the housing market recovery as "unexpectedly rapid".

So what has Chancellor Rishi Sunak done to try to help homebuyers?

What is stamp duty?

Stamp duty is a tax paid by people buying properties, although it varies slightly across the UK.

In England and Northern Ireland buyers pay Stamp Duty Land Tax.

In Scotland it is Land and Buildings Transaction Tax, while in Wales buyers pay Land Transaction Tax.

The amount handed to the government depends on where you are in the UK, and the price of the property.

The changes to stamp duty only apply to buyers in England and Northern Ireland.

What has changed?

The government has temporarily increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, until 31 March 2021,

Anyone completing on a main residence costing up to £500,000 before then will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount.

This will save buyers as much as £15,000, if they are buying a property of £500,000 or more.

The move was aimed at helping buyers who have taken a financial hit because of the coronavirus crisis.

It was also intended to boost a property market hit by lockdown, which - according to the Halifax - saw house prices fall for four months in a row.

The average stamp duty bill will drop by £4,500, Mr Sunak has suggested, with nearly nine out of 10 people buying a main home this year paying no stamp duty at all.

However, critics worry it could encourage people who were planning to buy next year to accelerate their plans to take advantage of the tax break. This could lead to a slump in demand when the tax break ends.

woman looking at houses for saleImage copyrightGETTY IMAGES

How much stamp duty will I pay now?

If the property purchased is your main home, you won't pay any stamp duty on it at all if it costs £500,000 or less.

The next portion of the property's price (£500,001 to £925,000) will be taxed at 5%, and the £575,000 after that (£925,001 to £1.5m) at 10%.

The remaining amount (over £1.5 million) will be taxed at 12%. You can calculate how much you are liable to pay here.

Before the announcement, stamp duty in England and Northern Ireland was paid on land or property sold for £125,000 or more, while first-time buyers did not pay any stamp duty up to £300,000. But this stamp duty holiday replaces the first-time buyer discount.

Landlords and second home buyers are also eligible for the tax cut but will still have to pay the extra 3% of stamp duty they were charged under the previous rules.

Table of stamp duty rates

What about Scotland and Wales?

In Scotland, the rates on Land and Buildings Transaction Tax are 2% on £145,001-£250,000, 5% on £250,001-£325,000, 10% on £325,001-£750,000, and 12% on any value above £750,000.

Scottish landlords pay an extra 4% Land and Buildings Transaction Tax on top of standard rates.

In Wales, the rates on Land Transaction Tax are 3.5% on £180,001-£250,000, 5% on £250,001-£400,000, 7.5% on £400,001-£750,000, 10% on £750,001-£1.5m, and 12% on any value above £1.5m.

Welsh landlords pay an extra 3% Land Transaction Tax on top of standard rates.

Family being shown around a houseImage copyrightGETTY IMAGES

How much does stamp duty raise?

The government's annual take from stamp duty is around £12bn, according to the latest figures released by HM Revenue and Customs (HMRC).

That's roughly equivalent to 2% of the Treasury's total tax take.

The nine-month stamp duty holiday in England and Northern Ireland - from July 2020 to March 2021 - will cost the Treasury an estimated £3.8bn.

Stamp Duty Land Tax: temporary reduced rates

Reduced rates of Stamp Duty Land Tax (SDLT) will apply for residential properties purchased from 8 July 2020 until 31 March 2021 inclusive.

 

Published 8 July 2020 From:  

Contents

  1. Residential Rates on purchases from 8 July 2020 to 31 March 2021
  2. Higher rates for additional properties
  3. New leasehold sales and transfers

Residential Rates on purchases from 8 July 2020 to 31 March 2021

If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount that you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property before.

You can use the table to work out the SDLT due:

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%

From 8 July 2020 to 31 March 2021 the special rules for first time buyers are replaced by the reduced rates set out above.

Use the SDLT calculator to work out how much tax you’ll pay.

Higher rates for additional properties

The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period 8 July 2020 to 31 March 2021.

The following rates apply:

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%

New leasehold sales and transfers

The nil rate band which applies to the ‘net present value’ of any rents payable for residential property is also increased to £500,000 from 8 July 2020 until 31 March 2021.

The following rates will apply:

Net Present Value of any Rent SDLT rate Up to £500,000 Zero Over £500,000 1%

Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.

On the 1 April 2021 the reduced rates shown in the above tables will revert to the rates of SDLT that were in place prior to 8 July 2020.

Published 8 July 2020
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