The Chancellor’s mini budget announcement today brings welcome news for the nation and at the heart of it, the Stamp Duty Land Tax (“Stamp Duty”) changes which are set to boost the economy and have been anticipated since the start of lockdown in March.
Stamp Duty is a tax paid by people buying properties within the UK although each country has its own system and the rules can vary. The amount of Stamp Duty payable depends on where you buy, how much you buy for and whether you are a first-time buyer, moving to replace your main residence or buying a second property.
The very generous change in the threshold at which point buyers pay Stamp Duty will increase from the original £125,000 to £500,000 under the new rules.
According to Rightmove, the average house price in Cheltenham over the last year is £342,722. Under the old rules for this value of property, a buyer moving to replace their main residence would have previously paid £7,136 in Stamp Duty and a first-time buyer would have paid £2,136 (being 5% over £300,000). Both will now pay nothing in Stamp Duty although a conveyancer will still need to submit a return to HM Revenue and Customs to disclose the purchase.
And if this wasn’t enough, buying a second home or buy-to-let property would have previously incurred a surcharge in Stamp Duty of 3% over and above the original Stamp Duty Rates. A buyer would have therefore paid £10,000 on a purchase price of a second home/buy-to-let at purchase price of £250,000. Under the new rules they will pay £7,500.00. This could have an impact on the lettings market and current housing crisis.
These are huge savings and will make all the difference to a first-time buyer being able to get a first step on the property ladder now or next year, a person wishing to buy a larger property to accommodate working from home or someone who has retired and looking to invest their pension and purchase a buy to let property.
It is quite often the expense of the Stamp Duty which puts people off moving home and even more so now due to the impact of the Coronavirus pandemic where everything is so cost sensitive. Therefore, if the intention of this announcement was to help get the economy moving and stimulate the housing market then, in my opinion, will certainly very likely have this effect.
It is understood that this measure will be temporary, lasting until 31 March 2021 and it is likely therefore that we will see both buyers and sellers looking for chains to move quickly so that they are able to take advantage of the temporary reduction which is due to come into force with immediate effect.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.