When purchasing a property, buyers are required to pay tax, known as Stamp Duty Land Tax. Stamp duty is payable on all properties costing over £125,000.00. Stamp duty is charged at different rates depending on the threshold and location of the property. The value of tax due is calculated as a percentage of the properties value. The payable amount of tax for each threshold is explained as follows:
- Properties under £125,000.00 = No Stamp Duty due.
- Properties between £125,000.01 - £500,000.00 = 2%
- Properties between £500,000.01 - £925,000.00 = 5%
- Properties between £925,000.01 - £1,500,000.00 = 10%
- Properties over £1,500,00.01 = 12%
On 8th July 2020, in response to Coronavirus, the Government announced that they would relieve stamp duty on property sales up to a value of £500,000.00. The movement was introduced with the aim to revive the property market, following the effects presented by lockdown. This initiative is appliable to property purchases only, as the tax is not payable when selling a property.
The scheme will take place until 31st March 2021. If you buy a residential property within the next 8 months, which has a value less than £500,000.00, you will not be required to pay stamp duty. This means that someone who is purchasing a property worth £500,000.00 would save £10,000.00! Stamp duty is still payable for properties over £500,000.01 however, you would pay nothing below £500,000.00. One example of this would be if you bought a property at £650,000.00, you would pay nothing on the first £500,000.00 but you would pay the normal rate for this threshold of 5% on the existing £150,000.00 which would be a total of £7,500.00.
First time buyers are already exempt from this paying stamp duty land tax, if their property is valued below £300,000.00. If the property is valued below £500,000.00 first time buyers do not pay stamp duty on the first £300,000.00 and with the introduction of this scheme, they will not be required to pay stamp duty on the remaining £200,000.00. If the property is of a value over £500,000.00 then tax rules apply.
The ‘Stamp Duty Holiday’ is also partly applicable to anyone buying a second home or an investment property (such as Buy to Let Properties) in England and Northern Ireland in that they will benefit from a reduction in tax. If you are buying a second property or a buy to let property, a higher rate of Stamp Duty will apply. Buyers who are simply replacing their residence, i.e. buying and selling, will only be required to pay the standard rate of stamp duty as explained above. The higher rate of stamp duty is an additional 3% to the standard rate of 2%, making the payable stamp duty 5%. These buyers are eligible for a 2% pay cut under the ‘Stamp Duty Holiday’ however, they will still be required to pay the remaining 3% where the property is valued over £40,000.01. Additional properties under £40,000.00 are already exempt from stamp duty. If you have an investment property or a second home, the rules of stamp duty can become complex. Our Lawyers are experts in advising on stamp duty and they will always take the time to look at your circumstances and evaluate the amount of stamp duty which is payable.
Anyone who purchased a property before the 8th July will still be required to pay Stamp Duty as the measure had not yet come into force. If your completion fell after this date, i.e. you had already exchanged contracts, but you had not completed, you will still be able to use this scheme.
Throughout July the property market has witnessed an 88% increase in demand, with prices up by 2.4% and buyer enquiries also increasing by 75% as a result of the introduction of the ‘Stamp Duty Holiday’ scheme.*
If you are thinking about buying or selling a property, our Residential Conveyancing Team here at Hodgkinsons Solicitors, Skegness, can help you to achieve your property goals. Our Property Lawyers are experts in helping Clients based throughout the UK, the East Midlands and rural Lincolnshire to include Skegness, Boston, Louth and Lincoln with a range of property transactions. To discuss your matter with a member of the Team call our Property Lawyers at Hodgkinsons Solicitors Skegness on 01754 897150 or submit a contact form to request a call back.