Aspiring homeowners will be given a much-needed boost after Chancellor Philip Hammond announced he will abolish stamp duty for all first-time buyers on properties up to £300,000.
The government has predicted that 95% of first-time buyers will see their stamp duty tax bill cut, while 80% will pay no stamp duty at all – with the changes effective from today.
Which? explains how the new stamp duty taxation will work.
What changes are being made to stamp duty?
Here, Which? Money expert Harry Rose explains the changes.
Stamp duty is a tax on residential property or land. Previously, homeowners in England, Northern Ireland and Wales have paid Stamp Duty Land Tax (SDLT) on properties worth over £125,000.
From today, there will be no stamp duty to pay on first-time buyer properties bought for up to £300,000. As an example, someone paying £208,000 for their first home will save £1,660.
Properties valued up to £500,000 are also eligible for stamp duty relief, which will be applied on the first £300,000, effectively knocking £5,000 off your tax bill – to help those buying their first home in expensive areas such as London. The stamp duty bill of the average first-time buyer in London will nearly halve, from £10,500 to £5,500.
So the new stamp duty rates for first time buyers from today are:
- Nothing if the property is below £300,000
- 5% on anything above £300,000, if the property is worth between £300,000 and £500,000
- The tiered rates under the old system for properties above £500,000 (ranging from 5% to 12%) – no tax relief is available for properties worth more than £500,000.
Use our calculator to find out what your stamp duty bill would be.
Previously, when you purchased property to live in worth more than £125,000, you had to pay stamp duty, regardless of whether it was your first home or not.
Different rates applied to different portions of the property value. Buyers paid 2% from £125,001 to £250,000; 5% from £250,001 to £925,000; 10% from £925,001 to £1.5 million; and 12% on anything over £1.5 million.
The changes will apply in England from today. Stamp duty will also apply in Wales until April 2018, while in Scotland, you pay Land and Buildings Transaction Tax instead.
- Want to share your views on the Budget? Join the conversation.