The Chancellor Rishi Sunak has confirmed a major stamp duty cut in a bid to boost the housing market.
Speaking at the summer economic update, Sunak revealed plans to raise the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland.
The stamp duty holiday will start immediately and run until 31 March 2021.
It means that nearly nine out of 10 transactions will no longer be subject to stamp duty.
Meanwhile, the average stamp duty bill will fall by £4,500. And in London and the South East, home to more expensive properties, buyers could save up to £14,999 overnight.
What is Stamp Duty?
Buyers must pay stamp duty when buying a home or piece of land worth £125,000 or more in England and Northern Ireland. It is charged on a tiered basis (so you only pay the higher rates on the slice above any threshold – the same as income tax).
These are the rates:
- Up to £125,000: 0%
- On the portion from £125,001 to £250,000: 2%
- On the portion from £250,001 to £925,000: 5%
- On the portion from £925,000 to £1.5m: 10%
- Above £1.5m: 12%
There are exemptions available for first time buyers who don’t have to pay stamp duty on the first £300,000, so long as the home doesn’t cost more than £500,000.
Meanwhile, people buying additional property for £40,000 or more, such as second homes, pay an extra 3% of stamp duty on top of regular stamp duty rates. The surcharge effectively works as a slab tax. In other words, the 3% loading applies to the entire purchase price of the property.
The stamp duty holiday is welcome news for buyers, estate agents and developers after the housing market was affected by the coronavirus crisis.
Sunak’s move will mean significant savings for some buyers at the lower end of the housing market in particular.
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