Rishi Sunak Unveils Stamp Duty Holiday

Posted on: 30 September 2020

What is Stamp Duty?

 

Stamp Duty, a form of property taxation raises around 12bn according to HM Revenue and Customs Treasury figures. Stamp Duty varies throughout the UK, so those living in Scotland pay Land and Buildings Transaction Tax, whereas in Wales it’s called Land Transaction Tax with the recent changes only applying to those living in England and Northern Ireland.

 

 

 


 

  

A UK wide stimulus

 

 

Staurt Adam

 

 

Stuart Adam, of the Institute for Fiscal Studies, said history showed that short term cuts in Stamp Duty can give 'effective fiscal stimulus' to an economy. 

 

He added: 'If the holiday is explicitly temporary then it can persuade people to bring forward moves that they might otherwise have delayed. If you get people buying houses again then it can pull a lot of other economic activity with it, such as spending on refurbishment, curtains, carpets, furniture, DIY and so on.

 

He went on to say; "It doesn't target the sectors hardest hit by the lockdown, such as the hospitality sector. But it might help the wider economy. If you want to do a fiscal stimulus via tax cuts then a temporary cut in stamp duty is fairly effective.'

 

 

 


 

 

The effects to Landlords and buyers

 

 

In both England and Northern Ireland Stamp Duty is applied on land or property sold for £125,000 or more. However no form of taxation is applied to first-time buyers for properties up to £300,000 with only 5% applied to any portion between £300,000 and £500,000.

 

For existing home buyers, Stamp Duty rates apply as 2% on £125,001-£250,000, 5% on £250,001-£925,000, 10% on £925,001-£1.5m, and 12% on any value above £1.5m.

 

When applied to the average outlet to purchase a home, that being £248,000, you would pay £2,460 in Stamp Duty to move home. Whilst rates again, vary for Scotland and Northern Ireland, Landlord Stamp Duty is applied at 3% when purchasing a buy-to-let property in England and Northern Ireland.

 

The buy-to-let market is now a much different animal for the average Landlord than ten years ago. New legislation introduced in recent months has led to a slump in profits for the average landlord and a mass exodus from the market from an extra 3% on stamp duty when purchasing an additional property with mortgage tax relief gradually phased out.

 

Charlotte Nixon, mortgage expert at Quilter, says the new Stamp Duty cuts could re-stimulate the property market and seduce buy-to-let investors back in to the market.

 

She says: "Buy-to-let investors have left the market in their droves over the last few years after tax changes have made it an untenable investment for many. The stamp duty holiday may serve to entice some of these investors back to the market.

 

Not only will this cut help to reignite the property market but also improve the supply of rental properties, which has been dwindling over the last 12 months."

 

According to Hamptons International, the average buy-to-let investor purchasing a home under £500,000 will save £4,720 as a result of the new changes.

 

 

 


 

 

  

How will thresholds be applied?

 

 

Rishi Sunak has now announced an upper threshold limit of £500,000, meaning that any property purchased lower than this would be effectively free from Stamp Duty.

 

The move is a welcomed one as according to Halifax, July is the fourth month in a row where house prices have been on the decline.

 

 

Rishi

 

 

 


 

 

 

What are the timescales?

 

 

From the present time until March 2021 home buyers will be free from paying Stamp Duty. Welcomed by many but causing some critics concern to fear for a potential slump after the initial gold rush of new buyers looking to take advantage of the tax breaks.

 

  

 


 

 

  

How much could you save?

 

 

Depending on your initial outlay up to the new possible - up to the possible new threshold of £500,00 the greater the saving. As a breakdown thats 0% duty on the first £125,000, 2% on the next £125,000 (£2,500), plus 5% on the final £25,000 (£1,250). So for an initial purchase price of £275,000, a £3,750 taxation would be applied.

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Rishi Sunak Unveils Stamp Duty Holiday

What is Stamp Duty?   Stamp Duty, a form of property taxation raises around 12bn according to HM Revenue and Customs Treasury figures. Stamp Duty varies throughout the UK, so those living in Scotland pay Land and Buildings Transaction Tax, whereas in Wales it’s called Land...

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