The government has confirmed that home buyers will not pay stamp duty on any home up to the value of £500,000. This is the latest in a number of measures designed to reduce the economic impact of the coronavirus crisis and ensure that young people, in particular, are not locked out of the housing market.
Before these changes were announced, home buyers were required to pay stamp duty on any property over the value of £125,000 or £300,000 for first time buyers. This limit will now be increased to £500,000 for anybody in England and Northern Island.
There is no waiting period and the new changes will come into effect immediately. The new system will be in place until at least 31st March and it is hoped that it will encourage more people to buy homes after a 7 week dip in the housing market during the coronavirus crisis. There has been no discussion of any potential extension of the scheme yet.
Many people that were considering a house move or buying their first home before the coronavirus crisis are now understandably cautious. When the economy is in a difficult position and people are unsure of what is going to happen over the next few months, they are less inclined to make large financial decisions, like buying a house. Unfortunately, this delay will cause the housing market to come to a grinding halt, so it is hoped that the incentive of a tax break will encourage people to buy sooner rather than later.
The stamp duty holiday is one of a number of measures that are aimed specifically at helping younger people, who have been disproportionately affected by the economic impact of the coronavirus crisis.
Under the standard stamp duty rules, you would pay £15,000 stamp duty on a £500,000 house. Under the new rules, anybody paying less than £500,000 will pay no stamp duty, and even those that are buying more expensive properties will still save around £15,000 in tax.
Based on the average house price in the UK right now, it is estimated that buyers will save £2,140 when buying a property. This is a significant saving for those that are already struggling to find the money for a deposit. In London, it is estimated that 57 percent of buyers will pay no stamp duty at all.
Anybody purchasing a buy-to-let property will benefit from the changes as well. Investors who purchase a property through a limited company will not have to pay stamp duty on any property up to the value of £500,000 either. They will, however, still be required to pay the 3% surcharge. This means that investors spending less than £500,000 only need to pay 3% tax instead of the usual 5%. They will pay 8% on any properties between £500,001 and £925,000; 13% on properties between £925,001 and £1.5 million and 15% on anything over £1.5 million.
The housing industry is one of the most important sectors for job creation, so the government hopes that this stamp duty holiday will encourage more building as demand for homes rises. It is also believed that encouraging people to move will free up more starter homes for people that are trying to get onto the property ladder.
The stamp duty holiday is in place until March 31st 2020 so if you are considering a move, now is the best time. Keep in mind that the average time for property completion is around 3 months, so you want to be sure to get your deal over the line before the holiday expires.
