On September 23rd, permanent reductions in Stamp Duty Land Tax (SDLT) took effect across England and Northern Ireland.
The threshold at which buyers are liable to pay stamp duty has now been doubled, rising from £125,000 to £250,000. Moreover, there is even better news for first-time buyers, as they are exempt from paying stamp duty until the property value exceeds £425,000. Previously, this threshold stood at £300,000.
What is Stamp Duty?
Stamp duty is a government-imposed tax on residential property or land purchases above a certain price within England or Northern Ireland. It’s important to note that separate tax systems exist in Wales and Scotland for property transactions. This tax applies to both cash and mortgage purchases, encompassing both freehold and leasehold properties.
What are the new stamp duty rates?
Stamp duty rates are categorized into different bands, with the tax calculated based on the portion of the property purchase falling within each band. The new stamp duty rates are as follows:
Property price % Rate Up to £250,000 0% The next £675,000 (portion from £250,001 to £925,000)* 5% The next £575,000 (portion from £925,001 to £1.5 million) 10% The remaining amount (portion above £1.5 million) 12%
*Unless you are a first-time buyer, in which case you will only pay 5% on the amount between £425,000 and £925,000. If the first home purchase exceeds £625,000, first-time buyer relief does not apply.
Previously, the rates were as follows:
Property price % Rate £0 – £125,000 0% The next £125,000 (portion from £125,001 to £250,000) 2% The next £675,000 (portion from £250,001 to £925,000) 5% The next £575,000 (portion from £925,001 to £1.5 million) 10% The remaining amount (portion above £1.5 million) 12%
Source: GOV.UK
Do the same rates apply for second homes?
If you are purchasing a second home valued above £40,000 without selling your first home, an additional 3% stamp duty is payable on top of the new rates. However, this rate does not apply to mobile homes, caravans, or houseboats.
Why have the rates decreased?
The reduction in rates is part of a broader government initiative to stimulate the economy in response to concerns about affordability. These cuts benefit both first-time buyers and existing homeowners, including those purchasing second properties.
Chancellor Kwasi Kwarteng stated, “Cuts to stamp duty will invigorate the housing market and support first-time buyers in establishing their roots.”
Despite concerns about rising interest rates, the stamp duty reductions present significant savings in the home buying process. Additionally, the Chancellor announced plans to enhance housing supply by releasing more land for new build developments. This will be accomplished by increasing the availability of surplus government land for housing projects.
