Stamp Duty Changes Explained
In his recent House of Commons summer address, Chancellor Rishi Sunak announced that the Government was scrapping Stamp Duty Land Tax (SDLT) on house purchases up to the value of £500,000 until 31st March 2021. The move has delighted the property sector because it will support the recovery of the housing market as home buyers will save thousands of pounds in tax.
These changes take immediate effect in England and Northern Ireland, however Wales and Scotland have announced their own measures, which we’ll also go into detail about.
Here, we scrutinise how the new rules will work, highlight all benefits for you and offer advice if you’re considering buying a new property.
Stamp Duty Changes in England and Northern Ireland
The new rules on stamp duty tax mean that the threshold has been lifted in England and Northern Ireland on any property worth up to £500,000. Previously, stamp duty tax applied from £125,000 or £300,000 if you were a first-time buyer. This means that people buying a new home or main residence, between now and March 2021 can make huge savings.
The change also benefits those looking to buy properties that cost more than £500,000. Because stamp duty is tiered, they won’t pay anything on the first £500,000 and will pay regular rates on anything above that threshold. The UK government estimates that 9 out of 10 people buying a home won’t have to pay any stamp duty at all.
New Stamp Duty Rates until 31st March 2021
The new rates on stamp duty land tax are:
£0-500,000 = 0%
£500,001-£925,000 = 5%
£925,001-£1.5m = 10%
£1.5m+ = 12%
How much money will you save?
Under these temporary measures, the more expensive home you’re buying, the more money you are going to save.
The government expects the average stamp duty bill to fall by £4,500, while the savings on properties priced at £500,000 will be £15,000. Here are some examples of the savings buyers will make on higher rates:
If you buy the property for £600,000 there is 0% tax on the first £500,000 and 5% on the next £100,000. The total SDLT bill is £5,000 (previously it would have been £20,000).
Property price: £750,000; 0% tax on the first £500,000; 5% on the next £250,000; Total bill equals £12,500 (previous bill = £27,500).
Property price: £1m; 0% tax on the first £500,000; 5% on the next £425,000; 10% on the last £75,000; A total bill of £28,750 (previous bill = £43,750).
Stamp Duty Cut & Buy-to-let
Homeowners looking to buy an investment property or a second home will still pay the 3% stamp duty surcharge, but this will be added to the latest temporary rates. This means you can still make huge savings on additional property purchases. The current rates are:
£0-500,000 = 3%
£500,001-925,000 = 8%
£925,001-1.5m = 13%
£1.5m+ = 15%
Previously, if you bought a property to let for £250,000, you would have had to pay 3% on the first £125,000 and 5% on the second £125,000, meaning your stamp duty bill was £10,000. Under the new rules, you’ll only pay 3% on the whole £250,000 purchase price, giving you a bill of £7,500 and a saving of £2,500.
Duty Changes in Scotland
The Scottish Government has changed its Land and Building Transaction Tax (LBTT) rates that come into force from the 15th July. The previous threshold of £145,000 has been replaced with the new level of £250,000 until 31st March 2021.
The Scottish government has said that this will mean that buying a property of £250,000 will see a saving of £2,100 in LBTT - also 80% of properties in Scotland will be exempt from LBTT completely.
Any person buying investment properties will also benefit from the new rules, but will have to pay the ‘additional dwelling supplement’ of 4%.
Stamp Duty Changes in Wales
The Welsh Government has announced it will change its Land Transaction Tax (LTT) from 27th July until 31st March 2021. LTT will only apply on purchases over £250,000, rather than the current level of £180,000.
This will mean a saving of £2,450 on property purchases to the value of £250,000 - the change also means 80% of transactions will be exempt from stamp duty. The reduction will not be applied to purchases of investment properties, buy-to-let and second homes.
The government have also stated that these changes will ensure £30 million will go towards funding energy-efficient social housing across Wales.
Pay the right SDLT
With the new SDLT rates in place, it’s important that you pay the right rate on property purchases. As experts in Stamp Duty Land Tax Refunds, exemptions and tax reliefs, CapEx can support you to ensure you pay the right rate based on the value of the property you have purchased.
If you think you’ve overpaid SDLT on residential properties or investment properties, we can support your claim. Get in touch with our tax advisors today to get your claim started today.