What is Stamp Duty and why is now a good time to buy?

The press has been awash with many stories of late. Aside from the obvious, there have been others of a more positive nature and one we at Barton Kendal estate agents Rochdale particularly love is the recent boom in the housing market. You might have noticed many people are moving house right now, which could otherwise be seen as surprising given the effects of the global pandemic. Now is a great time to sell your property. It is true that we have had to spend more time at home than ever before so you could be forgiven for thinking this is the reason many people are moving house. But isn’t it a little odd to make such a huge financial change in the midst of a global pandemic? The reality is that there are few better times to buy a new house than right now and it’s all down to stamp duty. Read on to learn more about it…

What exactly is stamp duty?

Terms surrounding property can get somewhat confusing, especially if you are buying a house for the first time, or if it was a while since your last purchase. After all, moving home isn’t something most of us choose to do that frequently! But you absolutely need to know what stamp duty is and factor it into your move. Stamp duty is short for ‘Stamp Duty Land Tax’ and is a tax that you need to pay to the government when you are buying a residential property (or land) here in England. It is worked out on a percentage basis of the final price you end up paying for your new land or home. There are different thresholds, and indeed, houses in the lowest price bracket are exempt from any stamp duty at all. 

The normal amounts payable are as follows:

  • House prices to £125,000 – 0% 
  • House prices from £125,001 to £250,000 – 2% 
  • House prices from £250,001 to £925,000 – 5% 
  • House prices from £925,001 to £1,500,000 – 10% 
  • House prices over £1,500,000 – 12% 

There are other considerations as well:

  • First-time buyers need not pay any stamp duty on properties up to the value of £300,000 (5% is payable on amounts above £300,000 to the value of £500,000)
  • If purchasing an additional property, whether it be to rent out or as a second home, the following amounts are normally payable:

            -   House prices to £40,000 – 0% 

            -   House prices from £40,001 to £125,000 – 3% 

            -   House prices from £125,001 to £250,000 – 5% 

            -   House prices from £250,001 to £925,000 – 8% 

            -   House prices from £925,001 to £1,500,000 – 13% 

            -    House prices over £1,500,000 – 15% 

What is the current situation with stamp duty?

The government were aware of the potential for the housing market to stagnate as a result of the insecurity surrounding the pandemic. As such, they introduced what was called the ‘stamp duty holiday’ on 8th July, 2020. This meant that no stamp duty was payable on houses up to the value of £500,000 – a potential saving of as much as £15,000. 

This was due to end on 31st March, 2021, but thanks to the unprecedented volume of transactions which occurred (which could never have been accurately predicted!), there is not only a backlog to complete, but also many others still wishing to move and benefit from the reduction.

For that reason, in this year’s March Budget, the Chancellor announced an extension with a phased return to these normal levels. The new situation is as follows:

The current ‘holiday’ remains in place until 30th June, 2021. These temporary new rates payable are as follows:

  • House prices to £500,000 – 0% 
  • House prices from £500,001 to £925,000 – 5% 
  • House prices from £925,001 to £1,500,000 – 10% 
  • House prices over £1,500,000 – 12% 

First-time buyers of course benefit more if buying over the original £300,000 threshold. For those buying an additional property, stamp duty will still be payable on those over £40,000 with the same thresholds as first homes with an additional 3% tax payable. 

These new rates will now remain in place until 1st July, 2021 when a phased return to normal will commence; 1st July to 30th September, stamp duty will become payable on houses over the value of £250,000 at the previous rates. As of 1st October 2021, everything returns to normal. First-time buyers will see their previous threshold return on 1st July, 2021. 

Why should I choose to buy a home right now? 

The true fact is that there has never been a better time to buy a home. Firstly, the stamp duty holiday means you can currently save as much as £15,000 and even in the phased return there are months of paying a reduced amount. But secondly, this change in legislation has meant that so many people are taking the opportunity to move home and for you, that means plenty of choice! It is likely your dream property will come on the market and you’ll be able to buy it and pay a significantly reduced rate of tax.

Here at Barton Kendal estate agents Rochdale, we’re seeing houses selling faster than ever before and you might well be surprised at the price your current home could fetch. So, if it’s something you’ve been considering, we urge you to move fast and get in touch with us to find out more on 01706 653 214 or contact us via our website. As local property experts, we will be able to help you decide and secure the perfect home for you.