The COVID-19 pandemic has wreaked havoc on our economy and in an effort to boost the housing market from the slump that it’s under, the Chancellor has issued a declaration that can help the average buyer save thousands. The reduced rates of Stamp Duty Land Tax indicates that tax rates for properties that are purchased for up to £500,000 is zero.
Rishi Sunak hopes that the reduction of SDLT or stamp duty will give the housing market the boost that it needs. This announcement was made in reaction to the predictions that house prices would fall and could cause the market to slump.
The stamp duty holiday has been estimated to cost the Treasury around £1.3 billion and that certainly sheds a light on the severity of the crisis we are currently facing. The Stamp Duty Land Tax holiday is scheduled to end by 31 March 2021.
Many housing market experts agree with the effort that the government has taken to address the housing market issue. Stamp duty holidays have been proven to provide movement and sufficient backing with the house market. This means that the majority of the property purchases made before the deadline will be free of tax.
This declaration is only applicable to England and Northern Ireland because Scotland and Wales have their own set of property taxes: Scotland has implemented the Land & Buildings Transaction Tax while Wales has placed into effect the Land Transaction Tax. The Stamp Duty Land Tax reduction is applicable to first time house buyers and experienced property buyers.
When you purchase a property, you are obliged to pay the stamp duty within 2 weeks of completion. The charge is based on the price of the property. For properties that are selling between £125,000 and £250,000, a charge of 2% is applicable to your purchase. The average selling price of homes in England belong to this range so this means you can get a considerable amount of savings if you decide to take advantage of the stamp duty holiday.
If you are a first-time buyer, you need to take note that you belong to different stamp duty exemptions. First time house buyers are not required to pay stamp duty for purchases that are less than £300,000, but if the purchase price is higher normal tax rates will be applied. For this reason, some people consider the chancellor’s announcement as having no financial benefit for them, however those who are willing to sell their existing property and purchase a new property will reap the benefits.
The stamp duty holiday is intended to benefit property buyers as they are the ones responsible for paying the tax however, evidence from previous years have shown that even the property sellers can save extra money. With property sellers (vendors) aware that potential buyers do not have to pay stamp duty, they may be more inclined to keep the asking price of their properties higher. As to who will ultimately benefit from the stamp duty holiday will all boil down to who has the most effective negotiation skills. As a whole, the stamp duty holiday will benefit both sellers and buyers.
Unfortunately, the chancellor’s announcement is not applicable for those who are planning to purchase a second home or buy-to-let properties. If you are planning to buy an additional property on top of your existing one, a stamp duty charge of 3% will be applied to you. The charging rates start at 3% and climb up to 15% for high-end properties.
This decision is considered a wise move by the Chancellor because adding landlords with multiple properties to the stamp duty holiday would seem disproportionately favourable to them.
Along with the Chancellor’s announcement of the Stamp Duty Land Tax reduction, the stamp duty slices still remain the same. From 8 July 2020 to 31 March 2021, the 2% stamp duty band is not applicable. It will go straight to 5% (for properties that range from £500,000 to £925,000) and 10% (for properties that are up to £1.5 million).
By now, you are probably wondering how much money you can save by taking advantage of the stamp duty holiday? The truth is simple: the higher the value of the purchase, the higher the stamp duty will be. So if you are already planning to buy a property, take advantage of this opportunity to earn savings from these tax cuts before 31 March 2021. For instance, if you are going to purchase a property that is worth £500,000, you are no longer required to pay the stamp duty of £15,000.
If you have decided to take advantage of the stamp duty holiday, the next thing you need to think about is how you plan on moving from your existing property to your new one. If you are based in the Cotswolds and the surrounding areas, call on Cotswold Carriers to take care of all your removal needs. We have been taking care of customers’ moving and storage needs for more than 40 years and our reputation speaks for itself, which is why our customers always return and recommend us to others.