First time buyers rejoice! The announcement made by the chancellor Rishi Sunak, states that from July 8th until 31st March 2021 there will be a stamp duty holiday for qualifying property sales. With potential savings to be made on stamp duty, now could be the best time to look at taking that first step onto the property ladder and buying your first home. In this post we will cover what stamp duty is and why this is good news for first time buyers.
What is Stamp duty?
Stamp duty or Stamp Duty Land Tax (SDLT) is a tax which has to be paid once a property or piece of land is bought by new owners. The term stamp duty originated from the fact you needed a physical stamp on a document to prove you had paid the tax. However, nowadays there are no physical stamps involved.
The term Stamp Duty can be traced all the way back to early 1600’s and in the UK has been implemented since 1694. Through the years it has been used in property and land sales across the country and is now classed as a self-assessment transfer tax.
What is the stamp duty holiday all about you ask?
As of 8th July 2020 any first time buyers and existing home owners who are purchasing a house valued at under £500,000 will not need to pay stamp duty on their purchase. This will be running until the end of March 2021 and has been introduced to ease the financial problems related to Covid-19 and help boost the property market for first time buyers. The holiday does not extend to those looking to purchase second homes or Buy to Lets.
Why is a stamp duty holiday good news for first time buyers?
The way stamp duty tax is worked out is based on the value of the house you are purchasing. Before the stamp duty holiday was introduced you would be required to pay a percentage of your house value as a tax, which was due upon completion of the sale. This, on top of the deposit and solicitor fees can make for a hefty amount of money required for first time buyers. This can often make it more difficult for younger people to buy their first home as it takes more time to save up.
The proof of this is in a survey conducted by Keepmoat Homes. They found that the average age of a first time buyer has risen by 7 years compared to those in the 1960s. House deposits, on average are also 30 times more expensive. This means that now the average first time buyer is 30 years old, however the stamp duty holiday could change this.
Prior to this stamp duty holiday, first time buyers already benefited from a tax banding, introduced in 2017, that meant they were exempt from paying anything at all on the first £300,000. If the property is valued above £300,000 but less than £500,000 then stamp duty is paid on the difference at a rate of 5%. So in effect, if you are a first time buyer looking to purchase a property at less than £300,000, the stamp duty holiday offers no real benefit, as this has been the case since 2017. For those able to afford something in the £300,000 to £500,00 bracket, now could well be a great time to buy, with savings of up to £10,000 possible. The additional benefit across the board is that existing homeowners may be more energised to sell, thus creating space for first time buyers as a whole. Existing homeowners deciding to move will also benefit from the stamp duty holiday and could save up to £15,000 based on the homeowners stamp duty banding.
As there is much to consider, for a first-time buyer, finding the right mortgage adviser is highly important and will assist in obtaining the very best mortgage advice. Here at Macbeth we aim to make things easier for you during this stressful time, providing you with whole of market advice and services.
Who is Macbeth and how can we help?
We are an independent financial adviser providing impartial mortgage advice. We offer professional guidance with a personal touch.
Not only will we help you to find the best interest rates we will save you time and money to focus on the bigger more important things in life such as finding your dream home.
To find out more about how we can help you with buying your first home contact us today.
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