RISHI Sunak has delighted home buyers in England and Northern Ireland by lifting the threshold for stamp duty to £500,000.
But what is stamp duty, and who pays for it? We explore below.
What is stamp duty?
Stamp duty is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
Until July 8 all house buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
The rate a buyer has to fork out varies depending on the price and type of property.
Who pays for stamp duty?
Home buyers always pay for stamp duty, not the seller.
This is often done through a solicitor on your behalf as part of the buying process, according to HomeOwnersAlliance.
Home buyers have fourteen days from the date of purchasing a property to file a return to HMRC with any stamp duty due.
Under new rules introduced by the Treasury from July 8, you will not have to pay any stamp duty on new property purchases up to £500,000.
However it is worth keeping in mind that rules differ in Scotland and Wales regarding stamp duty, so you can check out our separate article on that here.
The holiday will run until the end of March and will be applied to all residential purchasers, including first-time buyers, second-steppers and those who are looking to downsize.
But those who are buying additional properties will have to pay the usual 3 per cent surcharge on all properties below £500,000.
Before the Chancellor's announcement home buyers did not pay any stamp duty on the first £125,000 of homes, and the rate then increases in stages.
How much will I save under new rules?
The Treasury introduced the measure in a bid to revitalise the property market, which has frozen during the coronavirus pandemic.
It is hoped this will boost the economy as a whole, as lockdown restrictions are eased across various sectors.
The Chancellor said the average stamp duty bill will fall by £4,500, while nine out of ten people buying a main home this year will pay no stamp duty at all.
How much you will save from not having to pay stamp duty depends on how much the house costs, and whether or not it's a second property, but it could be tens of thousands.
It means that a home mover purchasing a house costing a typical £320,000, for example, would save £6,000 now that the stamp duty threshold has moved to £500,000, says accountancy and tax firm Blick Rothenberg.
How much could I save in stamp duty?
The government has increased the stamp duty free threshold to £500,000 for home buyers, movers, and first-time buyers. Here's how much you could save.
How much home movers or downsizers will save (if it's their only property):
- £100,000 property – No saving
- £200,000 property – £1,500 saving
- £300,000 property – £5,000 saving
- £400,000 property – £10,000 saving
- £500,000 property – £15,000 saving
How much first-time buyers will save (if it's their only property):
- £100,000 property – No saving
- £200,000 property – No saving
- £300,000 property – No saving
- £400,000 property – £5,000 saving
- £500,000 property – £10,000 saving
How much second or additional property owners will save:
- £100,000 property – £3,000 saving
- £200,000 property – £7,500 saving
- £300,000 property – £14,000 saving
- £400,000 property – £22,000 saving
- £500,000 property – £30,000 saving
Meanwhile, a downsizer purchasing a new home for £315,000 would save £5,750, according to Blick Rothenberg.
Of course, this assumes the asking price hasn't been jacked up as a result of any savings the seller knows buyers are making – something experts say could happen.
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