Are you Taking Advantage of the Stamp Duty Holiday?
When the COVID-19 pandemic started, we never expected it to hit us so hard that our normal way of living would be so drastically changed. And, just as expected, our economy has been affected so much that the Government has made major efforts to stimulate its growth.
Almost every industry has been experiencing a major slump, including the housing market, which is why the Chancellor announced a program that aims to boost it. Rishi Sunak has announced a stamp duty holiday for property purchases of up to £500,000. This reduction in taxation was formulated with the hopes of improving the potential stagnation of the housing market, a prediction which was made after the country was beginning to feel the ill-effects of the COVID-19 global pandemic.
The Treasury is estimated to give away £1.3 billion worth of aid and this sheds a light on how severely the pandemic is affecting the housing market. If you are planning to purchase a property and you have not taken advantage of this financial aid as of the moment, do not fret. You still have until 31 March 2021 to apply and qualify.
Numerous experts from the housing market gave the government a ‘thumbs up’ for making an effort to address the issues we are currently facing. Historically, previous stamp duty holiday implementations have been very successful. The most recent one is also aiming to provide sufficient support and boost the upward movement of the house market. For this reason, a big bulk of property investments made before 31 March 2021 will not be charged with stamp duty.
This announcement, however, is only applicable to limited areas in the UK. Because Scotland is under the Land & Buildings Transaction Tax and Wales is under the Land Transaction Tax, only property purchases made in England and Northern Ireland will qualify for the stamp duty holiday.
When investing in a property, buyers are required to pay a stamp duty after completing the purchase process. The rate of payment will be paid in accordance with the purchase price of the property. If a property is sold between £125,000 and £250,000, the property purchase will be charged with a 2% stamp duty. The majority of homes sold in England are within this price range. For an average homebuyer, this means they can enjoy a considerable amount of savings if they decide to apply for the stamp duty holiday.
However, first time buyers need to take note that they belong to a different band of stamp duty if they decide to invest in a property before 31 March 2021. By law, they are already given the privilege to enjoy a stamp duty holiday for property investments of up to £300,000 or less: if the purchase price goes beyond it, normal stamp duty rates will be applied. Because of this, a lot of first time buyers consider the Chancellor’s announcement bearing no financial advantage for them.
The recent announcement is also not applicable to investors of second homes or buy-to-let investments. If you are planning to purchase a second home in addition to your first one, the stamp duty rate starting at 3% is still applicable to you. The rate of charge will begin at 3% and rise up to 15% for premium properties. This is a wise move made by Rishi Sunak as it would seem disproportionately favourable if landlords with multiple investments would be allowed to enjoy the stamp duty holiday.
Along with the stamp duty holiday, regular rates will still be applied to purchases that go beyond £500,000. The stamp duty band will go directly to 5% which is applicable for purchases within the range of £500,000 to £925,000 and 10% which is applied to properties of up to £1.5 million.
If you are keen on investing in a property now, you should consider the stamp duty holiday. Just to give you an idea on how much you can potentially save, if the asking price of the property you are looking to buy is £500,000 you would be required to pay a stamp duty of £15,000 but because of the Chancellor’s announcement, this amount will be waived. This is savings that you can actually put to good use in other aspects of your life, don’t you agree?