The coronavirus crisis has hit many areas of the economy, and the property market is no exception. Although restrictions on moving house in England were removed on 13th May, reports suggest that property sales are a third lower than last year.
In a bid to tackle this, the UK government announced on 8th July it had introduced a temporary relaxation on stamp duty. Until the end of March 2021, the threshold for which stamp duty is charged on a residential property sale has been raised to £500,000.
It’s the government’s hope that this stamp duty holiday will encourage homebuyers and the property market to get moving again, but will it be successful? We take a look at the plan in detail and what it means if you’re thinking about purchasing a new home.
What is stamp duty?
In England or Northern Ireland, when you purchase property or land over a certain value you are required to pay a tax on that purchase, known as Stamp Duty Land Tax. The amount you pay depends on the value of the property, whether it is for residential use or not, and whether or not you’re a first-time buyer. The tax is different in Scotland and Wales.
So what’s changed with stamp duty?
Before the stamp duty holiday was introduced, you had to pay stamp duty on any property purchase over £125,000, or £300,000 if you were a first-time buyer. But as of 8th July, until 31st March 2021 you can buy a property for up to £500,000 without having to pay any stamp duty.
What’s more, if you already own a property, you’ll now pay less if you buy another; second properties bought for under £500,000 now incur a 3% tax instead of 5-8%.
However, these changes only apply to England and Northern Ireland; in Scotland and Wales, the threshold on a primary residence has been increased to £250,000.
| Stamp duty in England and Northern Ireland (until 31st March 2021) | ||
| Purchase price | Rate on main residence | Rate for additional properties |
| Up to £500,000 | 0% | 3%* |
| £500,001 – £925,000 | 5% | 8% |
| £925,001 – £1,500,000 | 10% | 13% |
| £1,500,001 + | 12% | 15% |
| Stamp duty in England and Northern Ireland (from 1st April 2021) | ||
| Purchase price | Rate on main residence | Rate for additional properties |
| Up to £125,000** | 0% | 3%* |
| £125,0001 – £250,000 | 2% | 5% |
| £250,001 – £925,000 | 5% | 8% |
| £925,001 – £1,500,000 | 10% | 13% |
| £1,500,001 + | 12% | 15% |
* Properties up to £40,000 are exempt from stamp duty.
** First-time buyers are exempt from stamp duty on the first £300,000.
How much will the stamp duty holiday save me?
Outside of the stamp duty holiday, you would normally pay 5-8% tax on the value of the property over the £125,000 threshold, which for the average house price in England of £232,000 would mean a stamp duty cost of £5,350. Now you can buy a property for up to £500,000 and pay no stamp duty – that’s a saving of £18,750.
The government has a useful tool on their website to help you calculate your Stamp Duty.
Will the stamp duty holiday be a success?
Only time will tell if the government’s increase on the stamp duty threshold will have a positive effect on the property market. Whether this is a large enough saving to encourage prospective buyers to take the plunge during a period of economic uncertainty will depend largely on personal financial circumstances, but any saving that can be made on a property purchase should be welcomed.
Here at Moveable we offer homemovers a variety of services to guide them through the process. Get in touch and we’ll explain how our helpful tools can make moving decisions easier; or sign-up now and start using our free web application.