The Chancellor, Rishi Sunak’s much-anticipated announcement on 8 July 2020 to help boost the economy post lockdown has included welcome news for homebuyers which will also help to stimulate further activity in the property market.
The Chancellor confirmed there will be no stamp duty to pay on property purchases up to £500,000 until 31 March 2021.
Stamp Duty Land Tax is a lump-sum tax that has to be paid by anyone purchasing a property or piece of land in England or Northern Ireland (Scotland and Wales have their own systems) that costs more than a set amount. The tax is paid when the sale of a property is completed and is based on the final sum paid for that property.
Previously, the Stamp Duty threshold in England and Northern Ireland is £125,000, or £300,000 for first-time buyers (if buying a property worth less than £500,000) so this immediate increase in the threshold is positive news for homebuyers who can now expect to save thousands.
Changes to Stamp Duty until 31st March 2021
• £0 – £500,000 | No Charge
• £500,001 – £925,000 | Charged at 5%
• £925,001 – £1,500,000 | Charged at 10%
• £1,500,001 + | Charged at 12%
The stamp duty holiday applies to all transactions that are completed before 31st March 2021. Because the threshold has been raised, buying over £500k will benefit from a saving of £15,000 too.
What does this mean if you’ve already got your house on the market?
If you already have your house on the market you should hopefully see an increase in potential purchasers, as the savings people could now make when purchasing a home may allow them to move more quickly than they had previously planned – they can now channel their funds towards their deposit rather than holding it back for Stamp Duty.
This will have a positive effect on demand for houses as more potential buyers hit the market.
Yes, there may be savings to be made for buyers following the Chancellor’s announcement, but mortgage companies will be aware of these Stamp Duty changes and will likely be tightening up their loan criteria.
For many sellers when deciding to move home there is a chicken or egg moment – is it best to put your home on the market for sale before starting your property search, or do you find somewhere you would like to buy before placing your property on the market?
Our best advice is always to get your property on the market as soon as you can.
In the majority of cases it’s only when you have secured a buyer are you actually able to go out and capture your next home. The market will open up more to you and you’ll be in a better position to negotiate. It is incorrect to think that by selling first before you find somewhere to buy that you will somehow be pushed out of your home or be put under pressure to move quickly.
So, if you haven’t already got your house on the market, but are thinking about moving you need to make sure you have a buyer before you start to look for your next home.
This is a clear sign that more people are looking to move following this latest news, meaning now is a great time to get an up-to-date marketing appraisal of your home and get your moving plans underway.
How will the Stamp Duty Holiday affect buyers?
Although a temporary measure, the savings that buyers could make from the Stamp Duty Holiday could be significant but will depend on how much the property they wish to purchase costs.
It is likely to be most beneficial for first-time buyers in the south-east and London as house prices are generally higher in these areas – elsewhere in the country first-time buyers would not typically be spending more than £300,000 on their first home.
• For a property worth £250,000, all first-time buyers were already exempt from paying Stamp Duty, but a house mover would pay £2,500.They will now pay nothing.
• A first-time buyer spending £495,000 on a home will now not pay any Stamp Duty and stand to save £9,750. A house mover spending the same sum would save £14,750.
• On a property worth £600,000, you will pay 5% on the portion above £500,000. Your bill will now be £5,000 – that is £15,000 less than you would have paid prior to this announcement.
There is a surcharge if you are buying a second home and this still remains despite the new Stamp Duty Holiday.
So what next?
There is little doubt that there are big savings to be made by purchasers following the Chancellor’s announcement and this will have a positive impact on people’s house buying and moving plans, as well as help kick, start the property industry and thus the wider economy – something we’re all aware is very much needed right now.
So if you are thinking of moving, whether it is to buy or sell, don’t hold off. Our network of branches across London and the Home Counties has a selection of homes in all price ranges, as well as expert teams who can help answer any questions you may have about the new Stamp Duty Holiday or the moving process in general.
Our Mortgage Services Division, Mortgage Scout also has access to mortgages from the whole the market and pride themselves on sourcing the most appropriate mortgage based on individual needs and that reflect the current marketplace.
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