Chancellor Rishi Sunak has recently cut the stamp duty tax to zero for almost 90% of home buyers, in a bid to help boost the UK economy and property market in the wake of coronavirus.
As of 8 July 2020, the tax threshold has been temporarily raised, meaning UK buyers will now pay no stamp duty on properties worth £500,000 or less. The new rates are set to be in place until 31 March 2021, with the change said to save each home-buyer an average of £4,500.
The news is welcomed by many industry professionals, who had been calling for a change in stamp duty rates over recent months to encourage new buyers. It now expected that those buying between £400k to £500k will save an impressive average of £15,000 on their transaction.
However, as well as first-time buyers and homeowners benefitting from the cut, the recent changes apply to everyone:
For many people who were holding off purchases due to uncertainty, this is likely to boost confidence to buy. But this does not just apply to homeowners.
Those purchasing second homes or buy-to-let properties also benefit from the stamp duty holiday. Property investors who purchase through limited companies will also be exempt up to £500,000. However, the pre-existing 3% surcharge on such purchases will still apply.
So property investors spending less than £500,000 will only need to pay 3% tax on top of the purchase, as opposed to the previous 5%. For the portion between £500,001 and £925,000, the charge will be 8%. Between £925,001 and £1.5m, the fee is 13%. The rate for the final portion above that is 15%.
The cut will certainly bring a swathe of previously hesitant buyers to the fore. While some investors have been waiting to see what happens with property prices, tax savings could prompt them to take action sooner.
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Matt Lenzie from Commercial Mortgages Broker said: “this is a positive news for the property market in general, and hopefully should see transactions to continue at the levels which we have been experiencing post COVID lockdown, the government has made lots of changes with stamp duty over the past few years, and there is a clear correlation between stamp duty costs and transaction levels, hopefully this continues.”