Since the Chancellor of the Exchequer, Rishi Sunak announced that there would be a holiday when it comes to one of the UK’s most controversial taxes; the Stamp Duty Land Tax (SDLT), there was rightful applause from across the country. Stamp Duty is perhaps the only tax in the UK in which the transaction itself incurs taxation. Typically, profits, income and perhaps even sales in some form may be taxed. However, Stamp Duty is a tax payable almost immediately as a property is purchased by the buyer.
Property entrepreneur Rex Ekaireb commented on the Stamp Duty holiday: “This is a positive move by the Government to stimulate the UK property market. After being hit so badly by the recent pandemic, this is a logical step to try and get things moving again.”
It is hoped that the Stamp Duty holiday announced by the Chancellor (as part of the measures introduced for the UK economy) can become more permanent. Such a move would unarguably encourage more people than ever to look to the property ladder. For many first time buyers, having to pay an additional fee of many thousands of pounds just for buying a property is one of the biggest stumbling blocks to getting onto the increasingly slippery and ever-steeper property ladder.
How Does the Stamp Duty Holiday Work?
The Stamp Duty holiday does not apply to everyone to whom the tax would otherwise apply. It does however apply to all properties up to the value of £500,000. It also applies to the first £500,000 value of any property, which to many means very sizable savings.
For first time buyers, there was already no Stamp Duty payable up to £300,000, but now, with the temporary Stamp Duty measures brought in, this has shifted up to £500,000. In essence, the UK Government have increased the threshold for Stamp Duty meaning that the tax which would otherwise have been paid on the property up to the value of £500,000 is removed.
Rex Ekaireb also commented on what this may mean for first time buyers. Ekaireb said: “For first time buyers, Stamp Duty can be many thousands of pounds. Removing this charge for those looking to buy their first property will mean the world to many.” Ekaireb continued “…with all that is going on in the country and indeed the wider world, a move that relieves even just some of the pressure on a particular group is certainly welcome.”
Usually, Stamp Duty applies to properties and all property values above £125,000. The rates payable are usually as follows:
- Up to £125,000 – 0%
- £125,001 – £250,000 – 2%
- £250,001 – £925,000 – 5%
- £925,001 – £1.5 million – 10%
- Above £1.5 million – 12%
The Stamp Duty holiday announced by Rishi Sunak however, removes all Stamp Duty up to £500,000. This means that until 1st April 2021, the thresholds now look as follows:
- Up to £500,000 – 0%
- £500,001 – £925,000 – 5%
- £925,001 – £1.5 million – 10%
- Above £1.5 million – 12%
What Does This Mean for Property Buyers?
For those purchasing properties up to £500,000, and with no Stamp Duty payable, there are large savings to be had. The average Stamp Duty bill is expected to fall by as much as £4,500. For those purchasing larger or more expensive properties, for example for those in London, savings will be potentially many more thousands of pounds.
The reduction and holiday in Stamp Duty has resulted in increased interest in the property market with more buyers coming forward to benefit from these savings. However, the flip side to this for first time buyers is that house prices have started to rise again, after a four month period of falling prices.
It is hoped however that the Stamp Duty holiday will help more people get on the property ladder and perhaps more importantly, help the multi-billion pound UK property market to rejuvenate itself after the hit it suffered as a result of the coronavirus pandemic.
