THOUSANDS of homebuyers are set to benefit from a cut to stamp duty from today.
In today's mini-budget, Chancellor Kwasi Kwarteng has announced plans to cut stamp duty in a bid to boost economic growth.
It is hoped that cutting the levy will encourage growth by allowing more people to move property and get more first-time buyers on the housing ladder.
Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.
Under the previous system, no stamp duty was paid on the first £125,000 of any property purchase.
The government has now doubled that – to £250,000 - for all home purchases.
The threshold at which the duty was paid for first-time buyers was £300,000.
But this too has increased, to £425,000.
The maximum value of a property on which first-time buyers’ relief can be claimed will also increase from £500,000 to £625,000.
It comes as the Chancellor announced:
- Beer price rise cancelled
- National Insurance rise scrapped saving hundreds a year
- Income tax cut from next April saving average £170 a year
- Boost for self employed as complex tax rules axed
- Low-tax investment zones for business
- Corporation tax hike scrapped
- Bankers bonus ditched
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Announcing the stamp duty cut, the Chancellor said: "First time buyers currently pay no stamp duty on the first £300,000.
"We’re increasing that threshold as well, to £425,000.
"And we’re going to increase the value of the property on which first time buyers can claim relief, from £500,000 to £625,000.
"The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether.
"This is a permanent cut to stamp duty, effective from today"
An increase to the thresholds at which you pay the tax could save some buyers thousands of pounds.
The mini-budget also included a freeze to corporation tax and saw the cap on bankers bonuses scrapped.
Yesterday, The Treasury confirmed that a 1.25% point increase to National Insurance will be scrapped from November 6.
The hike was first introduced in April and pushed up rates to 13.25% and 3.25%.
The move will save workers an average of £135 a year in 2022, rising to £330 in 2023-24.
We explain the exact amount your pay will rise to in November here.
Stamp duty can be difficult to understand, below we explain everything you need to know.
What is stamp duty?
Stamp duty is a payment you'll need to make if you're buying a property or piece of land.
You pay the tax when you:
- buy a freehold property
- buy a new or existing leasehold
- buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
The rate a buyer has to fork out depends on the price and type of property.
You only pay when the house you're buying costs more than a certain threshold- this is now £250,000 for residential properties.
The threshold for non-residential land and properties is now £425,000.
If you buy a property for less than these thresholds, then you don’t have to pay the tax.
Back in 2020 the Treasury temporarily raised the stamp duty threshold from £125,000 to £500,000 for property sales in England and Northern Ireland.
Who pays for stamp duty right now?
Home buyers always pay for stamp duty, not the seller.
This is often done through a solicitor on your behalf as part of the buying process, according to HomeOwnersAlliance.
Home buyers have fourteen days from the date of purchasing a property to file a return to HMRC with any stamp duty due.
Not everyone pays the same amount.
If you are a first-time buyer you can get a discount if the following applies to you:
- You, and anyone else you’re buying with, are first-time buyers
- The purchase price is £500,000 or less
This rule came in on July 1, 2021. You’ll also be eligible for this discount if you bought your first home before July 8, 2020.
There’s a long list of different types of non-residential or mixed-use properties, such as shops, offices and agricultural land, which you can check here.
The government’s Stamp Duty Land Tax Calculator can be used to understand what you should pay.