The chancellor has announced changes to stamp duty rates to help cut costs for anyone looking to buy a new home.
As part of his summer statement delivered to Parliament today (July 8), Rishi Sunak stated that the government will increase the threshold on which stamp duty must be paid on property purchases to £500,000, with the aim of boosting the housing market and encouraging buyers to become more active.
The announcement is being described as a ‘stamp duty holiday’, which will be in place until March 31, 2021, and comes as positive news for homebuyers.
What are the changes to the stamp duty rates?
To boost the property market, Rishi Sunak has temporarily increased the threshold for paying stamp duty to £500,000. This means no stamp duty will have to be paid on properties costing up to £500,000, compared to the £125,000 which was the previous threshold.
Commenting on his announcement, the chancellor said: “The average stamp duty bill will fall by £4,500. And nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all.”
The stamp duty holiday is to come in with immediate effect and run until March 31, 2021.
Cost savings for buyers
Introducing the holiday in stamp duty rates is a huge benefit for potential buyers, as this additional cost associated with purchasing a new home has been temporarily eliminated. It is hoped that the change will accelerate the decision of homeowners looking to move to new property thanks to the financial savings buyers can make.
Avant Homes chief operating officer, Mark Mitchell, commented on the changes: “The chancellor’s announcement on increasing the threshold of stamp duty is fantastic news for those looking for a new home. The impact of Covid-19 has created many challenges for both developers and homebuyers and not only does this mean buyers can make significant savings on purchasing a home, but it also acts as the perfect catalyst to boost the housing market.
“We very much welcome the changes and anticipate that buyers will jump at the opportunity to take advantage of the rates holiday.”
How much stamp duty would you normally pay when buying a home?
Stamp duty is paid on the sale of any property sold for £125,000 and more in England. The rates are set at 2 per cent on £125,001 - £250,000 of a property’s value and 5 per cent on £250,001 - £925,000.
For example, if you were to purchase a home at £275,000, you would pay no stamp duty on the first £125,000, 2 per cent stamp duty on the next £125,000 and 5 per cent on the remaining £25,000. This would total £3,750 in stamp duty fees. Under the stamp duty holiday, the buyer would be exempt from paying any stamp duty.*
First-time buyers are exempt for paying stamp duty up to the cost of £300,000, and would pay rates of 5 per cent on a property which is sold for between £300,000 - £500,000.