The Chancellor of the Exchequer Announced
The new rule, which came into effect on 8th July 2020 continues until 31st March 2021, is beneficial for both primary homeowners and buy-to-let (BTL) residential property buyers. Under it, there is no stamp duty payable on properties whose sale price is £500,000 or less. According to estimates, this means that roughly 8 out of 10 property buyers would be benefit as they would not have to pay any stamp duty to HMRC upon completion of the purchase.
While it's quite straightforward for primary residential property buyers, let's examine what it means for prospective BTL property buyers. The same rule applies even if you are looking to purchase a second or even third property (any residential property that will NOT be your primary residence) stamp duty would not be applicable for purchase prices up to £500,000. The old 3% stamp duty surcharge however is still payable. (since 2016, buyers of second properties have had to pay an extra 3% surcharge for purchases over £40,000)
So, does this mean that only those looking to buy properties under £500,000 would enjoy this benefit, which is merrily being declared as a 'tax holiday'? The answer to this question is no, even those purchasing more expensive properties would benefit. Let's see how.
Stamp duty calculation happens by breaking down the purchase price of a property into price bands. So, for a BTL property valued at £750,000, stamp duty payable earlier (effective 1st April 2016) was:
The lower rates that were applicable for the initial price bands with lower thresholds would not be applicable for the price bands with higher thresholds.
Another important thing to be noted is that first time home buyers, who were earlier entitled to 0 tax for a purchase price up to £300,000, will also benefit from this rule, but they would technically not be eligible for the first buy discount and this rebate would supersede that. A few more key points to be noted are:
Looking at the Larger Picture
This move is aimed at injecting a boost in the flagging property market scene in the UK, since this would encourage more people to purchase properties during this time. It would also influence many reluctant sellers to put their property on the market too. In this way, the process will remain continual and beneficial for every single party involved in the process, right from the estate agent who acts on behalf of the seller to the moving company that moves the buyer's furniture after the purchase has completed.
Buy-to-let property owners should also make use of this benefit by availing competitive mortgage rates to buy more or bigger rental properties, and even convert them from private to limited liability company holdings to saves taxes in the long run. This is because the stamp duty charge on transferring properties would also be reduced.If you are looking to grow your property portfolio, please feel free to contact our sales team on 020 8554 9999 who can advise you on how to get the benefits out of this opportunity