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Stamp Duty holiday explained

The Coronavirus pandemic has put thousands of holiday plans on hold, and it sums up life in lockdown very well when you can hear the word holiday and know it has nothing to do with packing a bag and travelling somewhere.

First we had the ‘mortgage holiday’ during the start of lockdown which allowed people to defer their monthly mortgage payments, and this week we were given the ‘stamp duty holiday’. So what does the holiday entail and who stands to benefit?

It is worth pointing out at the outset, that the term ‘holiday’ is somewhat misleading when it comes to the new stamp duty announcement, albeit in a positive way. Unlike the ‘mortgage holiday’ you are not deferring the payment of stamp duty to a later date. The new arrangement creates a window of time in which you can complete a purchase and pay no stamp duty or a significantly reduced amount. And while the holiday period ends on 31st March 2021 the HMRC will not revisit property transactions during the holiday period to request any payment.

What are the changes and who stands to benefit?

Prior to the stamp duty holiday there were 3 different rates of stamp duty that could be applied depending on your property owning history. What rate people fall into can be complicated in some circumstances but they can largely be categorised as follows:

  1. First Time Buyer
  2. Previous home owner who is replacing their main residence with a new home
  3. Previous home owner who will own two or more properties when they complete their purchase and they are not replacing their main residence

The table below shows how the holiday rates change the stamp duty bill on a house costing £400,000 for these 3 different categories of people and further detail is given on the changes below.

Purchaser statusNormal stamp duty liablity
(£400k property)
Holiday rate stamp duty liability
(£400k property)
First Time Buyer£5,000£0
Home Mover£10,000£0
Second Property Owner£22,000£12,000

First Time Buyers

First Time Buyers could previously buy a property up to the value of £300,000 and not pay any stamp duty (£500,000 for properties in London). If they purchased a property above that threshold stamp duty was charged and details of how it was charged can be found below.

First Time Buyers in the whole of Northern Ireland and England can now purchase a property up to the value of £500,000 without paying any stamp duty. That will understandably cover almost all first time buyers in Northern Ireland.

Home Movers

Someone who is purchasing a new home to replace their previous main residence would have ordinarily been liable to pay stamp duty on any portion of the purchase price above £125,000. This started at 2% on the portion between £125,001 to £250,000 and moved up to 5% on portion from £250,001 to £925,000.

During the stamp duty holiday, home movers will pay no stamp duty on a purchase of a property up to the value of £500,000. So for example, no stamp duty will be paid on the purchase of a house for £500,000 whereas the stamp duty bill prior to the announcement would have been £15,000.

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