Stamp duty cut up to £500,000: how much will you save?

 

Stamp duty slashed until 31 March for home buyers and buy-to-let investors

By Stephen Maunder, Which Website

8 Jul 2020

The government has scrapped stamp duty on house purchases of up to £500,000 until 31 March 2021, potentially saving homebuyers thousands of pounds in tax.

The move, which was announced by Chancellor Rishi Sunak yesterday afternoon, is designed to reignite the property market after the COVID-19 outbreak.

Here, we explain how the new rules will work and offer advice on who could be the biggest beneficiaries of the change.

Stamp duty slashed on purchases up to £500,000.

The government has raised the stamp duty threshold in England and Northern Ireland to £500,000 until 31 March 2021.

Previously, stamp duty kicked in at £125,000 (or £300,000 for first-time buyers), meaning people moving home later this year can make significant savings.

The change will also help people buying properties costing more than £500,000. As stamp duty is tiered, they will pay nothing on the first £500,000 and then normal rates on anything above that (see the table below).

The government says the temporary move will mean nine out of 10 people buying a home this year won’t need to pay any stamp duty at all.

The changes will apply from today in England and Northern Ireland, but will not apply in Scotland or Wales.

The new rates until 31 March 2021

Portion of property price	Percentage
£0-£500,000	0%
£500,001-£925,000	5%
£925,001-£1.5m	10%
Above £1.5m	12%

 

How much will you save?

Ultimately, the more expensive the home you’re buying, the more money you’ll save under these new rules.

The government predicts that the average stamp duty bill will fall by £4,500, but for properties priced at £500,000 the saving will be £15,000.

The examples below show how much you’ll pay depending on the price of the home you buy.

Property price £600,000 0% on the first £500,000; 5% on the next £100,000 – total bill of £5,000 (previous bill £20,000)

Property price £750,000 0% on the first £500,000; 5% on the next £250,000 – total bill of £12,500 (previous bill £27,500)

Property price £1m 0% on the first £500,000; 5% on the next £425,000; 10% on the remaining £75,000 – total bill of £28,750 (previous bill £43,750)

Does the stamp duty cut apply to buy-to-let?

If you’re buying an investment property or second home, you’ll still need to pay the 3% stamp duty surcharge, but this will be on the new temporary rates – so you could still make big savings.

The temporary rates for buy-to-let and second home purchases are shown below.

Portion of property price	Percentage
£0-£500,000	3%
£500,001-£925,000	8%
£925,001-£1.5m	13%
Above £1.5m	15%

 

Before today, if you bought an investment property for £250,000, you’d have paid 3% on the first £125,000 and 5% on the second £125,000, resulting in a stamp duty bill of £10,000.

From today, you’ll only pay 3% stamp duty on the whole purchase price, meaning a bill of £7,500 and a saving of £2,500.