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How much can the stamp duty holiday save you?

How much can the stamp duty holiday save you?


Last year in July, the government introduced a stamp duty holiday to prop up the faltering house market after the ravaging effects of the Covid pandemic. When announcing the 2021 budget, Chancellor Rishi Sunak extended the holiday until the end of June to allow more people to benefit from the scheme.

If you’re an aspiring homeowner, one question you might be asking is just how much the stamp duty can save you. Let’s crunch the numbers.  

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What is stamp duty?

Stamp Duty Land Tax (SLDT), to give it it’s full name, is a tax that you pay when you buy a property or land over a certain value in England or Northern Ireland.

The exact amount you pay depends on the value of the property. It also depends on whether you are a first-time buyer or buying a second or additional property.

What are the stamp duty holiday rules?

Under the stamp duty holiday rules, which apply to house sales completed before the end of June 2021, buyers do not pay stamp duty on the first £500,000 of their purchase.

After June, the threshold for stamp duty will go down to £250,000 until the end of September. It will then return to the usual level of £125,000.

This only applies to house sales in England and Northern Ireland. The rules are different in Scotland and Wales.

How much can the stamp duty holiday save me?

How much you can save depends on the value of the property and your circumstances as a homebuyer.

Some people might not save anything at all, while others could save tens of thousands.

First-time buyers

Since the threshold for stamp duty is £500,000, here’s how much you can expect to save for properties worth below this amount as a first-time buyer.

Property price

Savings

£100,000

None

£200,000

None

£300,000

None

£400,000

£5,000

£500, 000

£10,000

 

So, why no savings for properties worth £300,000 and below?

It’s because this is the stamp duty threshold for first-time buyers. If you were to buy a property worth less than £300,000 outside the stamp duty holiday window, you would not pay stamp duty anyway.

Non-first time buyers (previous owners, movers or those downsizing)

If you’ve previously owned a home at any time, here’s how much you can save on tax.

Property price

Savings

£100,000

None

£200,000

£1,500

£300,000

£5,000

£400,000

£10,000

£500,000

£15,000

 

Second or additional property buyers

The good news is that stamp duty does not exclude second or additional properties too. However, for these properties, you’ll have to pay a stamp duty surcharge of 3% on top of the revised rates.

But you’ll still be able to make the savings outlined below.

Property price

Savings

£100,000

£3,000

£200,000

£7,500

£300,000

£14,000

£400,000

£22,000

£500,000

£30,000

 

To figure out the exact amount you can save, use the online calculator on the gov.uk website.

You can compare how much you would have paid before the holiday and under the current rules by changing the transaction completion date. The difference between the two is your stamp duty saving.

What other help is available for buyers?

In addition to the stamp duty holiday extension, the chancellor also announced a new mortgage guarantee scheme to help aspiring homeowners with small deposits get onto the property ladder.

Under this scheme, the government will provide a guarantee to lenders who offer mortgages to buyers with a deposit of just 5% for properties worth up to £600,000.

The Help to Buy Scheme which also helps buyers purchase a property with just a 5% deposit has also been extended to the end of May. After it ends, it’s being replaced by a new version which will only be available to first-time buyers.

Final word

Clearly, it pays to try and complete your home purchase before the June deadline. You stand to save a lot of money which you could put towards moving expenses or even invest

Understandably, completing purchases on time could still prove to be difficult especially if you are just beginning your house buying journey. With the likelihood of the stamp duty being extended further quite low, you might still need to budget for paying stamp duty.

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