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A comprehensive guide to stamp duty changes in 2020

A comprehensive guide to stamp duty changes in 2020
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Buying a new home in the UK could become cheaper as a result of stamp duty changes in 2020.

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In this article, we explain how the new stamp duty changes could affect you.

Stamp duty changes 2020

Chancellor Rishi Sunak announced temporary stamp duty changes in 2020 which could save home buyers money.

Until 31 March 2021, buyers in England and Northern Ireland won’t have to pay stamp duty on properties worth of up to £500,000.

This applies to first-time buyers and previous property owners.

Homes worth more than £500,000 will incur the following stamp duty charges:

Portion of property Stamp duty rate
£0 – £500,000 0%
£500,001 – £925,000 5%
£925,001 – £1.5m 10%
Over £1.5m 12%

If you purchase an additional property such as a second home, a buy-to-let property or a holiday home and the property costs more than £40,000, you’ll have to pay an extra 3% stamp duty charge on the revised rates.

Why were the stamp duty changes introduced?

The coronavirus pandemic triggered a steep fall in house sales. 

Many businesses including estate agents had to close under lockdown measures to help tackle the spread of the disease.

The stamp duty changes in 2020 were introduced to help reenergise the housing market.

The measures aim to help buyers feel more confident and drive growth to create more jobs.

How much does stamp duty cost?

Stamp duty is tiered, which means you pay different levels of tax depending on the property price.

Ordinarily, the following stamp duty rates apply to properties in England and Northern Ireland:

Portion of property Stamp duty rate
£0 – £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1.5m 10%
Over £1.5m 12%

First-time buyers don’t pay stamp duty on homes up to £300,000. Properties between £301,000 and £500,000 incur a stamp duty charge of 5%.

Standard stamp duty rates apply to properties costing over £500,000. 

As a result of the changes, buyers won’t pay stamp duty on properties that cost up to £500,000 until 31 March 2021.

Will the stamp duty changes save me money?

Around nine in every 10 people buying a property as their main residence won’t pay any stamp duty at all, according to the Treasury.

As a general rule, the more expensive the property you buy, the more money you’ll save under the new stamp duty changes.

The government estimates that stamp duty will fall by £4,500 on average. People buying properties of £500,000 or more could save up to £15,000.  

Do the stamp duty changes affect Scotland and Wales?

In Scotland and Wales, the tax threshold for buying a home has also increased.

Buyers in Scotland won’t have to pay Land and Buildings Transaction Tax (LBTT) on the first £250,000 of a main residential property.

The following LBTT rates apply in Scotland until 31 March 2021:

Portion of property LBTT rate
£0-£250,000 0%
£250,001 – £325,000 5%
£325,001 – £750,000 10%
Over £750,000 12%

Those purchasing a buy-to-let property or second home will have to pay an extra 4% on each band.

Similarly, in Wales, buyers won’t pay Land Transaction Tax (LTT) on the first £250,000, although the bands are slightly different.

The following LTT rates apply in Wales until 31 March 2021:

Portion of property LTT rate
£0 – £250,000 0%
£250,000 – £400,000 5%
£401,001 – £750,000 7.5%
£750,000 – £1.5m 10%
Over £1.5m 12%

Those purchasing additional properties will continue to pay LTT at the standard rate.

When do you pay stamp duty?

Home buyers in England and Northern Ireland have to pay stamp duty to HM Revenue and Customs (HMRC) within 14 days of completion.

If you don’t pay stamp duty in time, HMRC may charge you a penalty and additional interest. 

Buyers in Scotland and Wales have 30 days to ensure the payment is made for the equivalent property taxes.  

How is stamp duty paid?

Stamp duty is usually paid through a solicitor or conveyancer. It is also possible to pay stamp duty yourself by completing a paper return.

It is your responsibility to ensure that the payment is made on time whichever option you choose.

You won’t have to submit a return if you are exempt from stamp duty.

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