If you are currently in the process of buying a property, you may know that the government raised the threshold for stamp duty last year, in an effort to boost the housing market during the coronavirus pandemic. However, this stamp duty holiday is due to end on 31st March, and many people are feeling the pressure to complete their purchases before the deadline. Want to know how the new rules may affect your purchase? Read on to find out more.
What is stamp duty?
Stamp Duty Land Tax is a tax that people pay when they buy a property in England and Northern Ireland. First-time buyers buying a property worth less than £500,000 are exempt from paying stamp duty, but if you already own a property and are buying another (e.g. for yourself or as a rental investment), it is necessary to pay stamp duty. The amount of stamp duty you owe will depend on the value of the property you’re buying.
How is stamp duty calculated?
Under the current pandemic rules, you do not need to pay stamp duty on the first £500,000 of a residential property purchase; above this amount, you pay 5% on the next £425,000, and larger percentages for more expensive properties. After the 31st March, stamp duty will revert to the old rules: 0% will be charged on the first £125,000, 2% on the next £125,000, 5% on the next £675,000, and higher percentages for more expensive properties. This means that, for people buying properties worth between £125,000 and £500,000, who are currently exempt from stamp duty, this tax will kick back in at the end of March.
To see how much stamp duty you will owe on your property purchase, you can use the government’s Stamp Duty Land Tax calculator.
What does this mean for me?
The end of the stamp duty holiday is still two months away, but in the world of property buying (and especially given the disruptions of lockdown), that deadline may arrive faster than you think. For many people, completing their purchase before the deadline will be very high priority because it could save them thousands of pounds, but some experts are warning that hurrying into a purchase just to beat the deadline could be more costly in the long run. For instance, you may be tempted to avoid getting an in-depth property survey that might reveal problems requiring expensive repairs that will cost you more to fix than you saved on stamp duty.
If you are currently buying a property and hoping to complete before the March deadline, it is fine to keep an eye on the calendar and keep the purchase moving as much as you can. But be sure not to sacrifice thoroughness or rush into a decision just to make it happen quicker, and always make sure you stay as informed as possible.
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Cover photo by Lukas Blazek on Unsplash