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Rishi Sunak’s Summer Statement unveiled the UK government’s latest plans to uplift the economy and help those worst hit by the coronavius pandemic.
Along with cut VAT for the hospitality sector, increased opportunities for young people looking for work and protection for furloughed jobs, the government’s £9bn pledge also includes a Stamp Duty holiday until 30th June 2021. It hopes to boost the property market following the pandemic-prompted decline.
Here are the revised Stamp Duty rates:
|Property Price||Stamp duty rate|
|Up to £500,000||0%|
|£500,001 – £925,000||5%|
|£925,000 – £1.5 million||10%|
|Over £1.5 million||12%|
If you’re not a homeowner, the chances are that you won’t have heard of Stamp Duty Land Tax. If you do own a home, you’ll know it as one of many additional costs incurred when buying a property.
Stamp Duty is basically a tax that was introduced in the UK in the late 1600s to raise funds to war with France. Less than a century later, it sparked the Boston Tea Party conflict and became the catalyst for America declaring independence from Great Britain.
Today, Stamp Duty is a more low-key affair. It’s a tax paid on property purchases of £125,000 or more in England and Northern Ireland. It makes the UK government an estimated £12 billion a year.
Ordinarily, Stamp Duty is paid as a tax on properties costing £125,000 or more (or £300,000 for first-time buyers).
Here’s how Stamp Duty usually works 👇
The Stamp Duty you pay is calculated based on the price of the property you’re buying.
In your case, £500,000.
As you’re a first-time buyer, you don’t pay Stamp Duty Land Tax on the first £300,000 of your purchase.
You pay 5% Stamp Duty on amount up to £500,000. For you, this is £10,000.
Your Stamp Duty Land Tax total is £10,000.
For a second home (i.e. a holiday home or buy-to-let property), you would pay an extra 3% in Stamp Duty on top of the above rates.
But following Sunak’s statement, the low threshold has been upped to £500,000, irrespective of whether you’re a first-time buyer or not.
This is a significant move from the government – and it will undoubtably make properties more affordable between now and 30th June 2021. But the market ramifications after June 2021 remain to be seen.
Since March this year, UK house prices have fallen every month consecutively. It’s therefore not surprising that the government are tackling the property market as a priority.
But let’s look at the facts and crunch some numbers.
Let’s say you’re a first time buyer. You buy a house worth £410,000.
Before 8th July 2020, you would pay 5% Stamp Duty on anything over the £300,000 tax-relief threshold.
£410,000 – £300,000 = £110,000
You would owe 5% of of £110,000 as Stamp Duty tax. That calculates as £5,500.
But under Sunak’s new Stamp Duty holiday, you only owe the tax on properties over £500,00. So if you buy your £410,000 home between 8th July to 30th June 2021, you won’t owe Stamp Duty at all, saving you the full £5,500.
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