On 8 July 2020, the Chancellor announced that there would be a temporary stamp duty cut until 31 March 2021.
A buyer will only pay Stamp Duty Land Tax if purchasing a property that costs more than £500,000 rather than the previous threshold of £125,000, or £300,000 for first-time buyers.
What is Stamp Duty Land Tax?
Stamp Duty otherwise known as Stamp Duty Land Tax (SDLT) is charged to buyers in England when purchasing a residential property or piece of land that costs more than £500,000. This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.
What do the stamp duty changes mean?
- The £500,000 cut off is applicable to all buyers who are selling a property to buy a new property and first-time buyers.
- For buyers who are buying an additional property, they will pay stamp duty of 3% of the home value if it is £500,000 or less.
3% SLDT for additional homes explained:
Anything other than your main residence is classed as an ‘additional home’ - this could be a holiday let, a property bought as an investment or somewhere you are helping another family member to buy - even if your main home is overseas. This charge does not apply to caravans, mobile homes, houseboats or plots of land.
Whilst Stamp Duty is charged on a tiered basis, the 3% surcharge effectively works as a slab tax.
This means that, if you buy a second home with a purchase price of £650,000, the additional surcharge would be £19,500 (3% of the entire price). This is in addition to the £7,500 Stamp Duty bill that would need to be paid on a home of this value, bringing the total payable to £27,000.
It is important to remember that if the property you are buying replaces your main residence, you will not be liable for the surcharge, even if you own additional properties (such as a second home or a flat you rent out) at the same time. However this can be a complex area and you should seek advice from a solicitor or conveyancer.
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