Coronavirus: UK government announces stamp duty holiday for properties up to £500,000
A temporary stamp duty holiday on home sales in England and Northern Ireland has been announced by the British government as part of a plan to kickstart the economy amid the coronavirus pandemic.
In a push to stimulate the market and boost sentiment, stamp duty—the transfer tax paid when buying a home—has been immediately scrapped on transactions up to £500,000 (US$630,000).
Buyers of homes priced above that new threshold, will pay no stamp duty on the first £500,000 of their buy, and then will be taxed gradually, up to a maximum rate of 12 per cent, on the rest of their purchase.
The new ruling will see far more buyers with non-existent or reduced tax bills. Previously, any buyer paying more than £125,000 for a property would be liable for stamp duty, with the exception of first-time buyers who would only start paying the tax on homes costing more than £300,000.
“House prices have fallen for the first time in eight years and uncertainty abounds in the market, a market we need to be thriving,” the Chancellor Rishi Sunak said in a statement. “We need people feeling confident, confident to buy, sell, renovate, move and improve.
That will drive growth, that will create jobs.”
The break will run until March 31, 2021, during which time the average stamp duty bill will fall by £4,500, according to Mr. Sunak.
Most buyers will find themselves exempt from stamp duty altogether by the measure, according to Hamptons International, but benefits will wane for buyers at the top of the market. The buyer of an £800,000 home, for example, will see their stamp duty bill cut in half, while someone paying £5 million will see a reduction of less than 3 per cent, the estate agency said in a report by Mansion Global.
The measure is expected to prompt a flurry of activity, according to property market experts, the start of which has already been seen.
Within the first 30 minutes of the chancellor’s announcement, traffic to online property portal Rightmove jumped 22 per cent.
“Lockdown prevented 175,000 would-be sellers from coming to market, so we hope this stamp duty holiday will provide the spur for those missing movers to come to market,” Rightmove property expert Miles Shipside said in a statement. “They will find there’s currently record demand for their properties from prospective buyers, with Rightmove inquiries to agents now double what they were before lockdown.”
The announcement may also prompt a rush of buyers looking to get a price agreed upon before some sellers increase their asking prices.
The hope would be that people could afford more as a result of the tax savings, he said.
In June, the average U.K. property price dipped 0.1per cent annually to £216,403, according to a report last week from Nationwide. As the chancellor noted in his speech, it was the first time values have dropped year-over-year since 2012.
The temporary reform has come at the right time, according to Nick Leeming, chairman of estate agency Jackson-Stops. Buyers purchasing at the top end of the new stamp duty threshold “are set to gain the most from this stamp duty holiday with savings of nearly £15,000,” he said.
Other economic recovery measures in the government’s plan include: Financial incentives for employers to bring back furloughed staff; discounts on eating out in August; and a tax cut for the hospitality and tourism sectors.
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