In a major boost for the housing market, Chancellor Rishi Sunak has just announced that, until 31st March of next year, stamp duty (SD) will not be payable on the first £500,000 of any house purchase. Buy-to-let investors and second home owners will also be eligible for the reduction but must continue paying their 3% surcharge on the full purchase price.
So how does the tax actually work?
What do the changes really mean?
How will this impact the sales market?
Stamp duty is a progressive tax, ie you pay nothing for the first £125,000 (£300,000 for first time buyers) and then 2% for the next £125,000, 5% for the next tranche and so on.
Standard bands (pre-holiday levels)
Bracket
Up to £125,000
£125,001-£250,000
£250,001-£925,000
£925,001-£1.5m
Over £1.5
According to Rishi Sunak, the changes mean 9 out of 10 primary home buyers will, during the holiday period, not have to pay any stamp duty at all. As you can see from the table below, savings top out for properties costing £500,000 plus, whose buyers will see their purchase costs come down by £15,000.This is a significant cash saving for purchasers as previously the stamp duty charge would have been paid from personal savings . The average buyer in London spends £628,284 and will save £15,000 . The table below gives you a rough guide to savings at different price levels.
Property value Standard Stamp Duty SD holiday rate Saving
£100,000
£200,000
£300,000
£400,000
£500,000 and above £15,000
Any purchaser buying in Notting Hill & Bayswater, where we specialise in, will directly benefit from the substantial saving due to the high value of property in the area as demonstrated in the tables below.
Notting Hill Standard Stamp Duty SD Holiday Saving
Average home: £1,908,765 £142,801.80 £127,801 £15,000.80
Average flat: £1,061,035 £49,853.50 £34,853 £15,000.50
Average terrace: £3,569,400 £342,078.00 £327,078 £15,000.00
Average semi: £7,315,090 £791,560.80 £776,560 £15,000.80
Bayswater Standard Stamp Duty SD Holiday Saving
Average home: £ 1,440,122 £87,762.20 £72,762.20 £15,000.00
Average flat: £ 1,069,049 £50,654.90 £35,654.90 £15,000.00
Average terrace: £ 2,931,231 £265,497.72 £250,497.72 £15,000.00
Average semi: £ 3,801,250 £369,900.00 £354,900.00 £15,000.00
The temporary reduction in SD is likely to substantially boost demand and is also likely to stimulate activity from both investors and second home buyers who’ve been previously put off by the high levels of tax.
looking back to 2016, when the then Chancellor, George Osborne, announced a 3% SD surcharge on BTL and second home purchases, it resulted in a huge spike in demand before the tax kicked in, almost doubling the normal number of sales in the month beforehand.
So taking into account the very real cash saving for purchasers plus the impact we have previously seen on the market when there have been significant tax changes in the past it seems the SD holiday represents an excellent opportunity for purchasers that are in position to buy and for sellers to capitalise on a once in a life time event allowing more buyers to enter the market, for a limited time only.
If you are considering selling & would like to discuss the above or any other property related matter the please feel free to contact Nigel or Douglas on 020 7243 3535
