1. What is the Stamp Duty Holiday?
As with any tax, paying Stamp Duty on a property can top costs up quite a bit which, following the Covid-19 crisis, would have put a lot of people in quite the pickle! That's why Rishi Sunak, Chancellor of the Exchequer, has increased the tax threshold from £125,000 to £500,000 for residential properties. This is in effect until 31 March 2021 and will more likely benefit home-movers rather than first-time buyers.
With nearly 9 out of 10 properties exempt from the tax, the temporary cut to the tax has created a real boom in the property industry with buyers flocking to move home before the holiday ends, making it an incredibly lucrative time to sell your home. As a Wirral estate agent, we have seen incredible demand for homes on the market from sellers looking to act fast and purchase their dream home. Take a look at some of our most recent properties on the market!
2. How Much Stamp Duty Will I Pay if I Spend Over £500,000?
The Stamp Duty Holiday has been extended to a second home and buy-to-let properties, however, they will still have to pay a 3% stamp duty surcharge on top of the standard rate. The following figures are from GOV.UK
|Property or lease premium or transfer value||Stamp duty rate|
|Up to £500,000||Zero|
|The next £425,000 (the portion from £500,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
3. What About for Additional Properties?
Additional properties will also have to pay the above in addition to the below rates.
|Property or lease premium or transfer value||SDLT rate|
|Up to £500,000||3%|
|The next £425,000 (the portion from £500,001 to £925,000)||8%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||13%|
|The remaining amount (the portion above £1.5 million)||15%|
4. What if I'm a First-Time Buyer?
Even before Covid-19, first-time buyers were exempt from paying Stamp Duty for properties below £300,000; with the average cost of a first-time buyer home in Wirral around £140,000, buyers were well in the safe bracket! However, for first-time buyers purchasing a home valued at £450,000, they would save £7,500!
Although it is unlikely for first-time buyers to spent over £500,000 on a home, they are said to be the ones most intent on buying this year with 93% looking to purchase their first home over the next few months, despite lockdown measures.
5. How Does This Effect Mortgage Applications?
People who no longer have to pay Stamp Duty can use the money saved to add to their deposit, allowing them to look at more expensive homes, or, they could use the higher deposit to lower the Loan-to-Value ratio and therefore, benefit from lower mortgage rates.