UK Stamp Duty Changes: our guide to the recent changes
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We’re sure many across the country will be pleased to hear news of the recent UK Stamp Duty changes. Following the recent announcement, the zero stamp duty rate threshold for homebuyers has doubled to £250,000 and increased even more to £425,000 for first-time buyers. But what does this mean?
We break it down for you…
What is Stamp Duty?
Stamp duty is a tax paid by homebuyers within England and Northern Ireland that varies depending on the value of the property you are buying. The tax was initially introduced in 1694 under the reign of William III and Mary II, in order to raise money for the war against France. Although the terms and conditions of the tax have varied drastically over the years, there are no current plans for it to be abolished.
How has Stamp Duty recently changed?
On the 23rd of September, the government reduced the amount of Stamp Duty that homebuyers in England and Northern Ireland have to pay.
First-time buyers
Following the changes, all first-time home buyers will not have to pay Stamp Duty on the first £425,000 of a property, as the zero stamp duty threshold has risen from £300,000. This applies to all first-house purchases up to the cost of £625,000.
Second-time buyers
Meanwhile, second-time buyers will not need to pay Stamp Duty on the first £250,000 of their new purchase. This figure has doubled from the previous £125,000 threshold.
Do these rules still apply in Scotland and Wales?
No, Stamp Duty is only paid in England and Northern Ireland. A similar tax is paid in Scotland and in Wales, but the conditions of each varies slightly. In Scotland, buyers pay a Land and Buildings Transaction Tax, which is not payable on the first £145,000 of a property’s value. Meanwhile, in Wales, the tax is called the Land Transaction Tax and is payable on properties above the value of £180,000.
What do the Stamp Duty changes mean for homebuyers?
This is considered great news for homebuyers – who are likely to have welcomed the additional relief in costs due to the significant savings that can be made. Estimates suggest that in London, for example, the buyer of an average house (at the cost of £543,000) would have previously had to pay £17,175 in stamp duty – but will now just pay £5,925. As house prices have increased over recent years, there is hope that this relief will support first-time buyers to get onto the property ladder.
Are house prices likely to rise due to the changes in Stamp Duty?
It is difficult to say. During the COVID-19 pandemic, the previous UK Chancellor, Rishi Sunak, introduced a Stamp Duty holiday – which fueled an unexpected increase in house prices. As such, there is a possibility that this similar government intervention may increase home prices, as the lower tax rate results in a rising demand for properties. However, some experts are suggesting that because the recent change in Stamp Duty is permanent, and not temporary (like the COVID-19 Stamp Duty holiday), there is unlikely to be such a drastic rise in demand, resulting in fewer fluctuations in house prices.
Here at DRN, we understand that buying a house is one of the most important and expensive decisions you’re likely to ever make.
We have years of experience offering a comprehensive range of fixed-price services, to help keep the legal costs of buying a new home to a minimum. So if you’d like to work with a team of fully qualified and experienced solicitors, please get in touch here!
