Stamp Duty: Will There Be Changes In The Near Future?

If you are buying a home in England or Northern Ireland and paying more than £125,000 (or more than £40,000 for second homes), then you will have to pay Stamp Duty Land Tax (SDLT) to HMRC . This applies to both freehold and leasehold properties and whether you are buying outright or using a mortgage.

If you’re buying a property in Scotland you will pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) rather than Stamp Duty.

How Is Stamp Duty Calculated?

Stamp Duty is calculated based on the purchase price and the portion of that price which falls a specific band. If you buy a house costing £275,000, and you are not a first time buyer or you are buying a second home, the Stamp Duty you pay will currently be calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250

Total payable = £3,750

Buyers of additional residential properties like second homes or buy-to-let properties, will be charged an extra 3% in Stamp Duty on top of current rates.

If you’re a first-time buyer in England or Northern Ireland, you will pay no Stamp Duty on properties costing under £300,000 meaning savings of up to £5,000. For properties costing up to £500,000, you will pay no Stamp Duty on the first £300,000 but will pay Stamp Duty on the remaining amount, up to £200,000.

Stamp Duty: Will There Be Changes In The Near Future?

Excessive Stamp Duty charges have been an obstacle for those on all levels of the property ladder. Several people in the property industry have called upon current Prime Minister, Boris Johnson, to act decisively on his previously proposed plan of scrapping Stamp Duty for homes costing less than £500,000. Included in these plans is the reduction of stamp duty from 12% to 7% on properties worth over £1.5m. This proposal is part of a new report called ‘Stamping Down’ made by the Centre for Policy Studies (CPS).

Raising the stamp duty threshold to £500,000 would remove stamp duty payments from 90% of property transactions.

Current Stamp Duty rates

Currently, Stamp Duty rates begin at 2% of the price on properties selling for anything above £125,000, rising to 5% on the next £675,000, 10% of any further £575,000 and 12% on any price above £1.5 million.

According to the CPS report, the average property transaction in England is charged £2,300 in stamp duty with homebuyers in the South East generally paying over £6,000. During the recent Conservative Party leadership contest, it was agreed that stamp duty should be reformed, with the figure of £500,000 mentioned as the level below which no stamp duty should be payable. Under these proposals, buyers would pay 4% on homes costing £500,000 to £1m and 5% above £1m, plus a 3% surcharge for overseas purchasers.

If the proposed changes were made, then around 300,000 property buyers would be exempt, having to pay no Stamp Duty whatsoever. This is based on figures from 2018/2019. This number could even increase as sellers with properties worth slightly over the stamp duty threshold could drop their sale price to appeal to more buyers. Bearing in mind the homes that are already exempt from stamp duty, then over 650,000 more sales than last year would not have had to pay the tax.

The proposed changes could mean that entire regions where the average price of property is below £500,000 would be alleviated Stamp Duty payments. This would boost transactions and help with economic growth in these areas.

Stamp Duty For First-Time Buyers.

Under current stamp duty rates, buyers of homes under £300,000 are exempt from paying Stamp Duty. The proposed increase in the stamp duty threshold means they would have the option to purchase a higher-priced home while still being exempt.

Stamp Duty And The Current Market.

The proposed policies are thought to be an attempt to get the property market moving in sectors both below £500,000 and those at the top end. The hike in Stamp Duty for more expensive homes in November 2014, affected the top tier of the market hugely and it has have been suffering ever since. The proposed cut in stamp duty rates from 12% to 7% would help revitalise this end of the sector.

How Much Stamp Duty Will I Pay?

To work out how much Stamp Duty you will be charged when buying a property, head over to our calculator and type in the details of the property you wish to buy.

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