Sarah is here to help house buyers and sellers get to grips with the conveyancing process. This month, she clarifies the government’s temporary reduction in stamp duty…
My solicitor tells me there is no longer any stamp duty to pay on the house I am buying. Why is this?
In July, the Chancellor announced a change to Stamp Duty Land Tax, to counter the effects of coronavirus and stimulate the property market. It took effect immediately and will remain in force until the end of March next year.
The stamp duty threshold has been increased from £125,000 to £500,000, meaning there is no tax to pay on the purchase of houses under this amount. Properties worth between £500,000 and £925,000 will attract stamp duty, but at a reduced rate of 5%, from £925,000 to £1.5 million, it will be payable at 10% and the proportion of any purchase price above this amount will incur tax at 12%.
The changes do not apply to transactions completed before July 8 and purchases made after March 31 will be liable to stamp duty at the usual rates.
A slight relief was also introduced on the stamp duty applicable to investment properties and holiday homes and your solicitor will be able to explain this in more detail. You will still have to pay the extra 3% applied to second homes, on top of the revised rate, but there are savings to be made. I would recommend contacting your financial adviser for an update on the amount now due.
The exemption applies to leasehold sales and transfers up to £500,000, as well as freehold purchases, meaning these properties will also be exempt.
I am about to purchase a house, despite the sale of my existing home being delayed. As I will own two properties for a short period, will I still benefit from the stamp duty changes?
At the point you complete your purchase, you will have to pay the higher rate of stamp duty detailed above, as it will be classed as a second home. However, as long as the sale of your current residence goes through within three years, you can apply for a refund.
If the house you are buying is worth less than £500,000, you will receive all of the money paid in tax back, as there is currently no stamp duty due at this purchase price.
Even though the stamp duty rates have been reduced and you may have no tax to pay, your solicitor will still have to submit a return on your behalf within 14 days of completion. Failure to do so could result in a financial penalty.
If you have any questions about the recent stamp duty reduction, don’t hesitate to contact me or my conveyancing colleagues on (0114) 218 4000 or email firstname.lastname@example.org