Myth busting – the Stamp Duty holiday
On 8 July, Chancellor Rishi Sunak announced that the threshold at which no Stamp Duty is payable on property purchases was to be increased from £125,000 to £500,000 until 31 March 2021. The Stamp Duty ‘holiday’, as it has become known, is designed to encourage reluctant buyers back into the property market, in order to get the industry moving again.
However, the announcement has also caused no small amount of confusion among the various parties who stand to benefit (and those who do not) from the cut. In this myth busting blog, we answer some of the questions causing the most confusion following Mr Sunak’s announcement.
I’m looking to buy a second property. Why has the Stamp Duty holiday failed to include second home buyers and landlords?
While it’s true that the 3% surcharge for buyers of additional properties remains in place, second home buyers and buy-to-let investors are far from unaffected by the holiday. The surcharge applies on top of standard Stamp Duty rates, meaning that those looking to purchase a property valued up to £500,000 will only be paying 3% Stamp Duty – as opposed to up to 8%, which they would have been paying prior to 8 July. This has the potential to save this group many thousands of pounds, not only those looking to buy a main residence.
For example, if you’re purchasing a buy-to-let property worth £425,000, and it completes on or before 31 March 2021, you’ll pay £12,750 in Stamp Duty, rather than the £24,000 you’d have been obliged to pay prior to 8 July.
The property I want to buy is worth more than £500,000. Does that mean the Stamp Duty holiday won’t apply to me?
Not at all! All it means is that you will have to pay some Stamp Duty on the proportion of the cost that exceeds £500,000. You’ll still save thousands on your Stamp Duty bill compared with what you would have paid prior to 8 July. For example, if the property you are purchasing is valued at £620,000, you’ll pay £6,000 in Stamp Duty. Under the previous thresholds, you would have paid £21,000 – a saving of £15,000.
Does the Stamp Duty holiday only apply to first-time buyers?
No. Although in November 2017, a Stamp Duty relief was introduced for first-time buyers, meaning that they would pay no Stamp Duty on properties valued up to £300,000, all buyers stand to benefit from the revised Stamp Duty threshold, whether or not they’ve previously owned a property.
My property transaction completed just before the announcement. Can I claim back the Stamp Duty?
Unfortunately, there is little evidence that the Chancellor plans to back-date the new Stamp Duty rates for people who have already moved. The cut is intended to give people who haven’t already moved the confidence to do so, rather than reward people who have already purchased.
However, if you exchanged contracts prior to the announcement, but completed on 8 July or after, then you’re in luck. Stamp Duty is only payable on completion of your transaction, not on exchange, so you’ll be able to benefit from the new rates.
Have more questions?
Our Residential Property lawyers have years of experience in dealing with all kinds of property purchases, and understand all the complicated ins and outs of the Stamp Duty system. To get in touch, please contact our Partner Sheri-Anne Mizon, on 0203 871 0007 or email her at firstname.lastname@example.org.