In a bid to help first time buyers onto the property ladder, Chancellor Kwasi Kwarteng today announced that the current stamp duty threshold of £300,000 for first time buyers will be raised to £425,000, meaning first time buyers do not have to pay any tax on the first £425,000 of the value of their property, and those buying a property priced at less than £425,000 will pay no stamp duty at all.
Further to this, the Chancellor announced that the Government will increase the value on the property of which first time buyers can claim relief on, up from £500,000 to now £625,000.
For those who aren’t first time buyers, Kwarteng has raised the standard stamp duty free threshold from £125,000 to £250,000. The stamp duty announcement from the Chancellor is a permanent cut effective from 23.09.22, which is set to save 200,000 from paying SDLT each year.
What is Stamp Duty and what has changed?
Stamp Duty Land Tax (SDLT) is a payment made by homebuyers when purchasing a property. How much you pay depends on a number of factors, including whether or not you are a first time buyer, and what the value of the house you are purchasing is.
Following the latest announcement, first time buyers will now have to pay:
- • no SDLT up to £425,000
- • 5% SDLT on the portion from £425,001 to £625,000
For first time buyers purchasing a home over £625,000, you cannot claim the relief. Instead, the new standard stamp duty rates will apply:
- • £0 – £250,000 (£425,000 for first time buyers) = 0%
- • £250,000 – £925,000 = 5%
- • £925,000 – £1,500,000 = 10%
- • £1,500,000+ = 12%
How much could I save?
The savings from the stamp duty holiday extension could be significant, as you pay nothing on the first £425,000, and varying percentages for any portion above this threshold. For instance, for properties between £425,001 to £625,000, a 5% tax applies to the portion above the £425,000 threshold.
Taking an example, if the property you are purchasing is valued at £475,000, you would pay a 5% stamp duty just on £50,000, equating to £2,500.
Prior to these latest changes to stamp duty, you would have paid £8,750 in SDLT on the same property. Which is a saving of £6,250!
How does stamp duty work when purchasing a home through Shared Ownership?
Through Shared Ownership, there are two options when it comes to stamp duty payment. The first is that you pay SDLT on the full market value of your home in one payment.
The second, is that you pay SDLT on the share that you are purchasing, and as and when you might choose to staircase, you may have to make further payments to increase your share of the property.
These payments will depend on the value of your property and the share that you own, and will follow the above percentage portions based on the new stamp duty cut announcement.
If you’re looking to purchase a new home, the changes to stamp duty might have made things a little bit easier. Search our range of homes across London and the counties and start your homebuying journey today!