July 9th, 2020
Stamp Duty Holiday – how will it impact me?
Over the last week the rumours were circling about what changes to Stamp Duty would be made during the Chancellor’s “mini budget” announcement. Yesterday (8th July 2020), the Chancellor confirmed what these changes are and how they will work.
We welcome these changes that have been made to help keep the housing market moving and look forward to implementing them on all our current and new cases. We anticipate that the majority of purchasers will benefit from these changes.
However, we understand that the changes may be confusing and you may not know how the changes will impact you. Therefore, we have below answered several of the frequently asked questions in relation the announcement:
What is Stamp Duty Land Tax?
Stamp Duty Land Tax is a tax payable to HMRC on the completion of a purchase of a property/land in England and Northern Ireland. Stamp Duty must be paid within 14 days of completion and your conveyancer will arrange to make the payment on your behalf.
What changes were introduced?
From now until 31 March 2021 the Stamp Duty threshold has been raised from £125,000 to £500,000. This means that any individual completing on a main residence up to the value of £500,000 before end of March 2021 will not pay any stamp duty. This will equate to a saving of £15,000 if you were to buy for £500,000!
What happens if my purchase is over £500,000?
If your purchase is over £500,000 then you only pay Stamp Duty on the value above that amount. An example may help explain this. Under the previous rules a purchase of £550,000 would have had stamp duty equating to £17,500. The new rules will mean Stamp Duty is only payable on the additional £50,000 (at a rate of 5%) and therefore the payment due is £2,500.
I am liable for additional rate Stamp Duty, how will this affect me?
If you are liable for additional rate Stamp Duty because you are purchasing an additional property or buying in the name of a company then you will still benefit from these changes. You will only pay the higher rate surcharge applicable to the purchase price. Again, an example will help explain this.
Under the old rules if you were purchasing a second property for £200,000 you would have paid £7,500 Stamp Duty (3% on the first £125,000 and the normal 2% rate plus a surcharge of 3% on the remaining £75,000).
Under the new rules you will only pay the 3% surcharge on anything
Please note that the percentages payable may be higher depending on the value of the property.
I completed last week, will I get a refund?
Unfortunately not. These changes are not retrospective and normal Stamp Duty will still be payable if you have completed recently.
I have already had an offer accepted and begun the conveyancing process or have exchanged contracts, will these new rules apply to me?
Yes they will! Some advisors anticipated that these rules will apply only to people having new offers accepted. However, that is not the case. Any matter completing between now and the end of March 2021 will be able to take advantage of these changes. It does not matter if you have exchanged contracts and set a completion date.
I am purchasing a property in Wales, will these rules apply to me?
Properties in Wales are subject to Land Transaction Tax and the rules are different as they are controlled by the Welsh Government. There have not been any announcements yet to confirm whether the Welsh Government will follow suit and introduce a similar scheme for Land Transaction Tax.
If you have any questions relating to the new rules then please do not hesitate to get in touch with one of our conveyancing team today. Please call us on 01179 731 391 or email [email protected].