The Stamp Duty Holiday – what is it and what does it mean?
Rishi Sunak, Chancellor of the Exchequer, has recently announced that until 30th June 2021 buyers will only pay stamp duty on properties above £500,000. This means that buyers could save up to £15,000 when purchasing a property. The stamp duty holiday threshold will be reduced to £250,000 between 1st July and 30th September and return to the original threshold of £125,000 on 1st October 2021. This means that those purchasing a property between 1st July – 30th September could save up to £2,500. The original stamp duty holiday deadline was 31st March 2021, however this has been extended to prevent thousands of home moves from falling through.
First time buyers purchasing a property costing less than £300,000 will remain unaffected by this holiday as they are already exempt from paying stamp duty. However, those first time buyers whose property is worth up to £500,000 will now not have to pay stamp duty on the portion above the £300,000 threshold (before 1st July 2021), as was previously the case. This means that first time buyers looking to buy properties over £350,000 can save between £2,500 and £10,000 during the initial stamp duty holiday period (before 1st July 2021).
Investors also benefit from this holiday. They still have to pay the 3% surcharge on second homes however the other stamp duty holiday elements apply as they do with other purchasers so giving a potential saving of up to £15,000 (before 1st July 2021).
First Time Buyers and Stamp Duty – what do you need to know?
In 2017, it was announced that first time buyers purchasing a property (that costs up to £500,000)
would be entitled to stamp duty relief. Stamp duty is not payable on the first £300,000 of a first
home, with any costs above that threshold being charged at the normal stamp duty rates. If the
property being purchased by first time buyers is above the £500,000 limit, then these exemption
rules do not apply, and the full stamp duty rates will be charged.
Who qualifies for first-time buyer stamp duty relief?
The relief applies to purchases made in England, Wales, and Northern Ireland. There are several
conditions that you must meet in order to be eligible for the relief. There can be no substitute to
fully reading the guidelines yourself in the Guidance Note, but we have summarised the four
1 You must be a first-time buyer
The Guidance Note provides a full definition of what constitutes a ‘first-time buyer’. Generally, if this
will be the first home you have ever purchased, you will count as a first-time buyer. If others are
involved in the purchase of the property with you, everyone must be a first-time buyer.
2 You must intend to live in the property
The Guidance Note refers to this as your ‘main dwelling’. So long as you intend for the property to
be your home, you will most likely satisfy this condition. As part of this, it is also worth noting that
companies are not allowed to be involved in the purchase of the property.
3 The price of the property must be less than £500,000
This one is exactly as it sounds. Only the costs that would normally be considered in working out
how much stamp duty you pay will apply. There are some finer points around this:
• Rent to pay under a lease will not be considered.
• If you are planning to purchase multiple properties in the same transaction, you will probably not
meet the requirements for this condition. There are some exceptions to this rule which fall under
the fourth condition regarding linked transactions (more on this below). If these exceptions apply to
you, the total cost will be worked out as the sum of your linked transactions.
4 Linked Transactions
If you are buying multiple dwellings as part of one transaction, it’s likely that you will not be eligible
for relief unless it’s a linked transaction. For example, you may wish to purchase other dwellings,
such as land, rights of way or gardens that the home you intend to buy depends on having. If this
applies to you, you can find more information via the Stamp Duty Land Tax Manual.
How do you claim first-time buyer stamp duty relief?
We would recommend reading Chapter 7 of the Guidance Note, but as a rule of thumb it states that
‘Relief must be claimed either in a land transaction return or an amendment to that return’.
For more information
Please do not hesitate to contact us here at Chancellors. If you would like any further help or
guidance, please visit or call your local branch.
Correct at time of publication (18th September 2020). The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.