Stamp duty freeze leads double whammy of property positives

Home buyers who may have been sitting on the fence about moving now have two extra reasons to make the leap. On the 8th July 2020, the Chancellor Rishi Sunak delivered an address to the nation confirming the nil rate stamp duty threshold would be temporarily raised.

As of now, no stamp duty land tax (SDLT) is due on homes worth £500,000 or less – or on the first £500,000 of a property purchase if the home is worth more than £500,000. Both homeowners and landlords will also be able to access a new ‘green’ home improvement grant of up to £10,000 to make energy efficient improvements. 

The Chancellor’s economic address has come at a time when the property industry seeks to keep the nation moving and to provide a boost for the wider economy. Having digested the announcement, the key details you need to know are below:-

Stamp duty freeze

Stamp duty will not apply to the first £500,000 of a home’s purchase price. That means there will be no stamp duty to pay at all if the property is bought for £500,000 or less, and stamp duty will only apply to the portion over £500,000 if the purchase price is over £500,000.  

This measure came into effect on Wednesday 8th July and will initially run until 31st March 2021. The stamp duty saving applies to all property purchases, whether the buyer is a first-timer, second stepper, some trading up to a bigger property, a downsizer, a buy-to-let investor or someone purchasing a holiday home. It is worth noting, however, that extra stamp duty rates still apply to the purchase of ‘additional’ properties – those in addition to a person’s main residence (see table below).

Potential stamp duty savings

On a property worth the national average of £248,000, a buyer will save £2,460. If the purchase price is £500,000, a buyer will be £15,000 better off. It is hoped the money saved will be spent by home buyers in the retail, hospitality and leisure industries to help businesses recover post-pandemic.

The new, temporary stamp duty tiers are below:-

Property or lease premium or transfer value SDLT 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%

 

Buying an additional property during the temporary stamp duty freeze

The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period 8th July 2020 to 31st March 2021. These are:

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%

 

‘Green Energy Grant’ for home improvement 

This £2 billion initiative is a ‘three for the price of one’ scheme, with thousands of households across the country eligible to apply for a new home improvement grant that doesn’t have to be repaid (it is not a loan). 

As well as allowing many people – landlords as well as homeowners – to make energy-saving changes to their property (such as installing a new boiler or improving insulation), the stimulus is set to create and save thousands of jobs in the trade, utility and energy sectors, as well as make a positive contribution to the UK’s pledge to reduce carbon emissions and energy consumption.

This is a great initiative for buyers who may be considering renovation or modernisation projects, where the property they are buying needs updating in terms of glazing, heating, lighting and insulation. The voucher will cover up to three quarters of the cost of eco improvements to the value of £5,000 per household, or £10,000 per household deemed to be low income.

Also announced….

VAT on food, accommodation and attractions will be reduced from 20% to 5%, starting on Wednesday 15th July until January 12th 2021. This is a measure also designed to stimulate spending and put more money back in the pockets of the general public. 

If you would like to see a sample of properties for sale that are now available stamp duty free or with a reduced stamp duty bill – or need help working out what your new stamp duty bill might be – please contact us today.