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Temporary stamp duty changes and what they mean for home buyers

Written by Ipswich Building Society

8 Jul 2020

Tags

Budget, Stamp duty

4 min read

As part of the summer statement the Chancellor of the Exchequer, Rishi Sunak, has announced a temporary change to Stamp Duty Land Tax (SDLT), more commonly known as stamp duty.

 

What exactly is stamp duty?

Stamp duty is a tax which applies to property purchases. The government has frequently introduced various changes to stamp duty to stimulate the housing market, and previously to give support to first time buyers in particular.

 

What are these latest changes?

From 8 July 2020 until 31 March 2021, main residential property purchases in England and Northern Ireland will not be subject to any stamp duty for the first £500,000 of the purchase price. For properties purchased above this amount, stamp duty will only be charged on the value above £500,000 and applies in stages for each portion of the purchase price:

 Portion of purchase price Tax applied
 Up to £500,000 0%
 £500,001 to £925,000 5% 
 £925,001 to £1.5m 10%
£1.5m+12%
 

How much stamp duty will I pay?

Firstly, for any purchases under £500,000 you will not need to pay any stamp duty. This can equal some serious savings and give you additional funds to either put towards your purchase, spend on decorating and furnishing or put back into your savings pot.

If you are purchasing a property above £500,000, the tax is only charged on each incremental portion of the purchase price. For example:

If you are buying a property at £750,000 you will pay the following:

0% tax on the first portion up to £500,000
5% tax on the portion from £500,001 – £750,000 (your purchase price)
This means you will pay stamp duty of: £12,499.95

If you are purchasing a property at £1.1m, you will pay the following:

0% tax on the first portion up to £500,000
5% tax on the portion from £500,001 – £925,000
10% tax on the portion from £925,001 to £1.1m (your purchase price)
This means you will pay stamp duty of: £38,749.85

These examples are given as a guide. For an online stamp duty calculator visit The Money Advice Service website.

 

Do these changes apply just to first time buyers?

No, this increased threshold applies to any main residential property purchase throughout England and Northern Ireland.

 

What are the changes for buy to let or additional property purchases?

If you are purchasing a property in addition to your main residence, such as a second home or to rent out to tenants, the pre-existing 3% surcharge will continue to be applied to the stamp duty rates. This means additional property purchases will also see savings on stamp duty, with the thresholds now calculated at:

Portion of purchase price Tax applied
 Up to £500,000 3%
 £500,001 to £925,000 8% 
 £925,001 to £1.5m 13%
 £1.5m+ 15%
 

Why have these changes been made?

The Chancellor’s summer statement was focused on helping people who have suffered financially during the pandemic, with the stamp duty initiative just one of a number of measures introduced to boost the country’s finances. It is a clear indicator of how critical the government see the housing market in relation to the overall health of the UK economy.

 

For full information on stamp duty visit the government website

 

This article was published under our previous name of Ipswich Building Society. We changed our name in 2021 – find out more.

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