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Stamp Duty cuts - what you need to know

Hannah Duncan looks at the new Stamp Duty cuts, reveals which UK property hotspots could benefit the most and what you could do with your Stamp Duty savings after buying a house.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

On 8 July this year, hopeful home buyers were glued to their sofas as Chancellor Rishi Sunak spoke. To the delight of many, Sunak announced reduced rates in stamp duty until 31 March next year to help lift the housing market out of its lockdown slump.

So far it seems to have done the trick.

A recent report showing average house prices in August rose 2% to an all-time high, likely thanks in part to the rate cuts and pent up demand.

So, what do the cuts mean for home buyers around the UK?

This article is not personal advice. If you’re unsure, please ask for advice. Remember that tax rules change, and benefits depend on individual circumstances.

For home buyers in England and Northern Ireland

England and Northern Ireland benefit from the most generous cuts. Most home buyers can now get tax breaks on properties worth up to £500,000. This threshold is twice as high as Scotland and Wales and means buyers can save as much as £15,000. So we could be hearing a few champagne corks popping over the coming months.

Below we look at the changes to Stamp Duty rates for residential property purchased in England or Northern Ireland. If you’re buying an additional property, you’ll usually have to pay an additional 3% on top of the below rates.

Temporary Stamp Duty Rates

(Rates from 8 July 2020 until 31 March 2021)

Property Price Stamp duty
Up to £500,000 0%
The next £425,000 (between £500,001 and £925,000) 5%
The next £575,000 (between £925,001 to £1.5 million) 10%
Anything above £1.5 million 12%

Source: HMRC, correct as at 4 Sept 2020

Normal Stamp Duty rates

(Rates resume from 1 April 2021)

Property Price *Stamp duty
Up to £125,000 0%
The next £125,000 (between £125,001 and £250,000) 2%
The next £675,000 (between £250,001 and £925,000) 5%
The next £575,000 (between £925,001 and £1.5 million) 10%
Anything above £1.5 million 12%

Source: HMRC, correct as at 4 Sept 2020

*First time buyers don’t pay stamp duty on the first £300,000, but they’ll then pay 5% on the remainder when buying a home for £500,000 or less.

How much could buyers save?

People buying a property will save up to a staggering £15,000. This could mean that there’s a lot more room in the budget for renovating the property or making a higher offer.

Property Price Temporary Stamp Duty Normal Stamp Duty Saving
£100,000 £0 £0 £0
£150,000 £0 £500 £500
£200,000 £0 £1,500 £1,500
£300,000 £0 £5,000 £5,000
£400,000 £0 £10,000 £10,000
£500,000 £0 £15,000 £15,000
£600,000 £5,000 £20,000 £15,000
£750,000 £12,500 £27,500 £15,000
£1 million £28,750 £43,750 £15,000
£1.5 million £78,750 £93,750 £15,000

Source: Knight Frank Stamp Duty Calculator. Correct as at 4 Sept 2020

Average savings by region in England

Across England, Londoners are most likely to benefit from the Stamp Duty cuts, saving £13,951 on average. House hunters in the South East and East of England are the next in line to benefit the most, saving an average of £6,233 and £4,531.

The part of England least likely to make serious savings is the North East, where average house prices land at around £134,545, saving them just £191.

Region Average Property Price Temporary Stamp Duty Normal Stamp Duty Average saving
East Midlands £197,505 £0 £1,450 £1,450
East of England £290,621 £0 £4,531 £4,531
London £479,018 £0 £13,951 £13,951
North East £134,545 £0 £191 £191
North West £168,261 £0 £865 £865
South East £324,659 £0 £6,233 £6,233
South West £261,006 £0 £3,050 £3,050
West Midlands £203,658 £0 £1,573 £1,573
Yorkshire and The Humber £170,198 £0 £904 £904

Average property price by region source: HM Land Registry UK House Price Index summary May 2020. Stamp duty saving source Knight Frank Stamp Duty Calculator. Correct as at 4 Sept 2020

Savings in Northern Ireland

The average property price in Northern Ireland is £140,580 (as of the first quarter in 2020). So it’s unlikely that lots of buyers will benefit much. The district that could benefit most from the cuts is Lisburn and Castlereagh, where the average home costs £165,294 (a saving of £805.88). Other districts include Ards and North Down, where property prices average at £155,795 (a saving of £615.90).

For home buyers in Scotland

From 15 July 2020 until 31 March 2021, house hunters in Scotland can enjoy cuts to the Land & Buildings Transaction Tax (LBTT). Scottish Finance Secretary, Kate Forbes, has raised the LBTT threshold to £250,000. So, those buying a home which costs less than this won’t have to pay any LBTT - providing it isn’t a second home or additional property. If it is that will attract the Additional Dwelling Supplement of 4% of the total purchase price.

Latest figures show the average property price in Scotland in May stood at £154,648. So lots of buyers should be able to enjoy some tax cuts. The most expensive place is Edinburgh where the average home sets buyers back by £273,601. Under the new rules, an average home buyer in Edinburgh could expect to pay just £1,180 in LBTT, with a saving of £2,100 compared to the normal rates. The least expensive place is Inverclyde with properties costing an average £88,477. Here most buyers would enjoy duty-free sales both now and under the normal rates.

Temporary LBTT rates

(Rates from 15 July 2020 until 31 March 2021)

Property Price LBTT rate
Up to £250,000 0%
The next £75,000 (between £250,001 and £325,000) 5%
The next £425,000 (between £325,001 to £750,000) 10%
Anything above £750,000 12%

Source: Revenue Scotland, correct as at 4 Sept 2020

Normal LBTT rates

(Rates resume from 1 April 2021)

Property Price LBTT rate
Up to £145,000 0%
The next £105,000 (between £145,001 and £250,000) 2%
The next £75,000 (between £250,001 and £325,000) 5%
The next £425,000 (between £325,001 to £750,000) 10%
Anything above £750,000 12%

Source: Revenue Scotland, correct as at 4 Sept 2020

For home buyers in Wales

Residential property buyers in Wales can also benefit from reduced rates of Land Transaction Tax (LTT), which came into force on 27 July 2020. Buyers (who aren’t buying an additional residential property) won’t have to pay any LTT on the first £250,000 of the property purchase price.

As of March 2020, the average property price in Wales reached £169,436 - a 4.8% increase on the year before. The most expensive county is Monmouthshire, where property prices come to an average of £276,359. People looking to purchase a home in this region could expect to now spend £1,317.95 on Land Transaction Tax. Before the new rates, the tax would have come to £3,767.95 – saving buyers a healthy £2,450.

The least expensive property prices in Wales can be found in Blaenau Gwent, where homes cost an average of £100,585 (an 11.2% increase on the year before). Generally, more buyers here would enjoy tax-free purchases both before and after 27 July 2020. As with in other areas of the country, different stamp duty rates apply when buying second homes and additional properties.

New Land Transaction Tax rates

(Rates from 27 July 2020 until 31 March 2021)

Property Price LTT rate
Up to £250,000 0%
The next £150,000 (between £250,001 and £400,000) 5%
The next £350,000 (between £400,001 to £750,000) 7.5%
The next £750,000 (between £750,001 to £1.5 million) 10%
Anything above £1.5 million 12%

Source: Welsh Government correct as at 4 Sept 2020

Previous Land Transaction Tax rates

(Rates resume from 1 April 2021)

Property Price LTT rate
Up to £180,000 0%
The next £70,000 (between £180,001 and £250,000) 3.5%
The next £150,000 (between £250,001 and £400,000) 5%
The next £350,000 (between £400,001 and £750,000) 7.5%
The next £750,000 (between £750,001 to £1.5 million) 10%
Anything above £1.5 million 12%

Source: Welsh Government correct as at 4 Sept 2020

This article should help to give you a good overview of the tax duty cuts and changes. However the information here doesn’t apply to everybody’s individual circumstances. Before purchasing a property, you should do your own checks.

To find out more and see how much you could save, you could use the government's Stamp duty calculator.

How can you make the most of your Stamp Duty savings?

If you’re one of the UK home buyers who’s managed to save on Stamp Duty, picking up even more tax perks doesn’t have to stop there. You could think about investing in a Stocks and Shares ISA.

It takes minutes to set up an account online, With a Stocks and Shares ISA, you can invest up to £20,000 each tax year, free of UK income or capital gains tax. Remember that all investments rise and fall in value, so you could get back less than you invest.

Find out more on Stocks and Shares ISAs

Where to invest your Stocks and Shares ISA?

To help give you some inspiration, take a look at our latest ISA investment ideas.

Investing in these funds won’t be right for everyone. You should:

  • Be comfortable deciding if a fund fits your investment goals and how much risk you’re happy taking
  • Know how to choose and maintain a diverse mix of funds to reduce risk

And when investing it’s important not to put all your eggs in one basket. Spreading your money, diversifying, gives you access to more opportunities and can reduce risk by investing in more individual areas or markets.

FIND OUT MORE ABOUT DIVERSIFICATION

For investors who don't feel comfortable building and maintaining a portfolio we offer ready-made portfolios, which are aligned to broad investment objectives. You’ll need to regularly review the portfolios to make sure it remains right for your needs and objectives. For anyone who wants personalised recommendations, you can also ask us for financial advice.

Hannah Duncan is an investment writer, and founder of Hannah Duncan Investment Content, with years of experience producing content for global leaders in finance and retail.


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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