UK Stamp Duty Cut: A guide to the threshold Changes
The threshold for paying stamp duty has doubled to £250,000 and for first-time buyers, it's been increased to £425,000. This guide explains the changes in full!
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The threshold for paying zero stamp duty has doubled to £250,000 and for first-time buyers, it has been increased to £425,000.
The new chancellor, Kwasi Kwarteng, confirmed on Friday 23rd September 2022 that stamp duty thresholds have been altered, with no tax to be paid on properties up to the value of £250,000.
Kwarteng announced the policy in parliament as part of a mini-budget, almost one year after the last stamp duty holiday, introduced by then-chancellor Rishi Sunak, ended. He also increased the threshold for first-time buyers to £425,000. In this guide, we explain the changes in full.
What is stamp duty and how is it changing?
Stamp duty is a tax paid by homebuyers (both first-time buyers and those buying second, third homes etc) in England and Northern Ireland, based on the value of the property they are buying.
The government has announced a permanent change to the format of the tax, mainly consisting of changing the threshold at which buyers have to pay. The threshold is rising from £125,000 to £250,000.
Previously, the first £125,000 of a property’s value was tax free. Buyers were then charged:
- 2% of the value of the property above that threshold up to £250,000
- then, 5% on the portion between £250,001 and £925,000.
When will the stamp duty cut be introduced?
The change in stamp duty took effect immediately after being announced in parliament, on Friday 23rd September 2022. So if you are completing on purchasing your home today, or any time in the near future, you will indeed benefit from the changed rates.
A breakdown of the changes
Under the new system:
- The first £250,000 of a property’s value will be exempt, and buyers will pay 5% of the value of the home from £250,001
- The portion between £925,001 and £1.5m will continue to be taxed at 10%
- Any property worth more than that will be subject to stamp duty rates of 12%
How do the stamp duty changes affect first-time buyers?
The threshold for stamp-duty is also changing for first-time buyers. First-time homeowners will now have a higher threshold for paying stamp duty - changing from £300,000 to £425,000. This decision has been made in an attempt to increase home ownership and encourage people onto the property ladder. Under the plans, the first-time buyer relief will be applicable to properties worth up to £425,000, compared with the current £300,000.
Is stamp duty changing in Wales and Scotland too?
The tax and stamp duty rules on property sales in England and Northern Ireland are separate from those in Wales and Scotland. The alterations in stamp duty rates announced in today’s statement will only apply to England and Northern Ireland.
Will this stamp duty update increase house prices?
The covid-19 pandemic induced stamp duty holiday ,introduced by the previous Chancellor Rishi Sunak, fuelled unexpected increases in house prices. Although it is impossible to predict accurately, any government influence on the housing market, such as this stamp duty change, could negatively drive house prices up as the lower tax rate may result in a rising demand.
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