Stamp duty freeze: will London buyers benefit?
Fri 10 Jul 2020
Paul Bennett, Director
The Chancellor’s stamp duty freeze has led to claims that 90% of buyers in England will not pay any stamp duty at all if they buy between now and March 31st 2021 but what about the remaining buyers? The other 10% will mainly be concentrated in the capital city where, according to Zoopla’s figures in July 2020, the average price of a property is £595,443.
Property investors will also be wondering whether they will benefit from a reduced stamp duty bill, especially since all changes to legislation over the past few years has been pretty punishing for landlords.
Behr & Butchoff has taken time to digest the summer statement, particularly with our client base here in and around St John’s Wood in mind. The good news is no one has been left out, says Paul Bennett: “Although not clear in the initial aftermath of Rishi Sunak’s announcement, we have been able to clarify that the freeze on stamp duty applies to all purchases – whether the buyer is a first-timer, an upsizer, a downsizer, someone buying a base in the capital or a property investor.”
The devil, as always, is in the detail, says Paul: “The threshold at which stamp duty applies has been raised to £500,000. While homes costing less than this will not incur a stamp duty bill between now and the end of March 2021, stamp duty is still due on the portion of a home’s value over £500,000. Those buying buy-to-let properties or a holiday home, for example, will benefit from the stamp duty freeze but are still expected to pay the higher rate tiers of stamp duty for additional property purchases.”
Buyers active in the prime and super prime London markets will enjoy a reduced stamp duty bill equivalent to a £15,000 saving across the board, says Paul. As below:
|
Property value, freehold & main residence |
Stamp Duty due between 8th July 2020 and 31st March 2021 |
Old stamp duty due |
|
£500,000 |
Zero |
£15,000 |
|
£750,000 |
£12,500 |
£27,500 |
|
£1 million |
£28,750 |
£43,750 |
|
£2 million |
£138,750 |
£153,750 |
|
Property value, freehold & additional property |
Stamp Duty due between 8th July 2020 and 31st March 2021 |
Old stamp duty due |
|
£500,000 |
£15,000 |
£30,000 |
|
£750,000 |
£35,000 |
£50,000 |
|
£1 million |
£58,750 |
£73,750 |
|
£2 million |
£198,750 |
£213,750 |
The new stamp duty tiers that run from now until 31st March 2021 are below:-
|
Property or lease premium or transfer value |
SDLT rate |
|
Up to £500,000 |
Zero |
|
The next £425,000 (the portion from £500,001 to £925,000) |
5% |
|
The next £575,000 (the portion from £925,001 to £1.5 million) |
10% |
|
The remaining amount (the portion above £1.5 million) |
12% |
Buying an additional property during the temporary stamp duty freeze
The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above until 31st March 2021. These are:
|
Property or lease premium or transfer value |
SDLT rate |
|
Up to £500,000 |
3% |
|
The next £425,000 (the portion from £500,001 to £925,000) |
8% |
|
The next £575,000 (the portion from £925,001 to £1.5 million) |
13% |
|
The remaining amount (the portion above £1.5 million) |
15% |
“Interestingly and positively, landlords have also been included in the Government’s new Green Energy Grant home improvement scheme,” adds Paul. “Those who own a rental property will be entitled to apply for a voucher in the same way owner occupiers are.”
The voucher will cover up to three quarters of the cost of eco improvements - such replacement windows, a new boiler and upgraded insulation - to the value of £5,000 per household. “This is a great boost for landlords, especially those who are aiming to improve their EPC rating and provide tenants with lower running costs,” concludes Paul.
If you would like any help interpreting the Chancellor’s stamp duty announcement, including working out what your reduced stamp duty bill could be, please contact the Behr & Butchoff team.