Today, Chancellor of the Exchequer, Rishi Sunak announced a stamp duty holiday for those purchasing a property in England and Northern Ireland.
The stamp duty holiday is due to last up until March 2021 and will save house buyers up to £15,000 on property purchases.
Stamp duty is a tax paid by people purchasing property. In England and Northern Ireland, stamp duty is paid on property and land sold for £125,001 or more. The new budget announcement means that this threshold has been raised to £500,000. So those purchasing a property up until March 2021 won’t have to pay any stamp duty on a property up to the value of £500,000.
For those who have purchased property before, stamp duty rates are:
|2%||for properties priced between £125,001 – £250,000|
|5%||for properties priced between £250,001 – £925,000|
|10%||for properties priced between £925,001 – £1.5m|
|12%||on any value above £1.5m|
Before the stamp duty holiday was announced, stamp duty meant that someone purchasing a house for £233,855, the average cost of a house in the UK, would currently pay £2,177 in stamp duty. With the stamp duty holiday in place, it’s hoping that property purchases will increase across the UK and the housing market will recover from damage caused by the coronavirus.
People purchasing a second home or a buy-to-let property will also benefit from the stamp duty holiday, but will still have to pay the 3% extra duty due on the entire price. This means that they will pay a flat rate of 3% up to the value of £500,000, whereas before they were paying stamp duty + the 3% extra duty. This means that for a property worth £300,000, the stamp duty paid would now be £9,000 instead of the usual £14,000.
If you think back to March 2020, Sunak confirmed plans to add a further 2% surcharge on top of stamp duty land tax for non-resident buyers of property in the UK. The surcharge wasn’t due to go into effect until April 2021, but it’s now unclear whether this will still happen. Without the increase in place and with a stamp duty holiday until March 2021, purchasing buy-to-let property in England and Northern Ireland is even more lucrative than it once was.
Another reassurance for buy-to-let investors is the rental market's resilience. Savills recently highlighted that the rental market is much tougher than capital values during times of economic uncertainty. In the 2008 financial crisis, overall rents only fell by 2%, whilst house prices dipped by 18%.
This window of opportunity won’t last forever, once the market fully recovers and the stamp duty holiday ends, purchasing property will become more expensive. If you’d like to hear more about our investment opportunities, get in touch to find out more.