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14 Jul 2020

Stamp duty cut up to £500,000: how much will you save?

Stamp duty slashed until 31 March for home buyers and buy-to-let investors

The government has scrapped stamp duty on house purchases of up to £500,000 until 31 March 2021, potentially saving homebuyers thousands of pounds in tax.

The move, which was announced by Chancellor Rishi Sunak, is designed to reignite the property market after the COVID-19 outbreak.

These changes apply in England and Northern Ireland, but the Scottish and Welsh governments have also announced changes to their own systems, which we'll explain below.

Here, we analyse how the new rules will work and offer advice on who could be the biggest beneficiaries.

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Stamp duty slashed on purchases up to £500,000

The government has raised the stamp duty threshold in England and Northern Ireland to £500,000 until 31 March 2021.

Previously, stamp duty kicked in at £125,000 (or £300,000 for first-time buyers), meaning people moving home later this year can make significant savings.

The change will also help people buying properties costing more than £500,000. As stamp duty is tiered, they will pay nothing on the first £500,000 and then normal rates on anything above that (see the table below).

The government says the temporary move will mean nine out of 10 people buying a home this year won't need to pay any stamp duty at all.

Stamp duty: the new rates until 31 March 2021

Portion of property pricePercentage
Above £1.5m12%

How much will you save?

Ultimately, the more expensive the home you're buying, the more money you'll save under these new rules.

The government predicts that the average stamp duty bill will fall by £4,500, but for properties priced at £500,000 the saving will be £15,000.

The examples below show how much you'll pay depending on the price of the home you buy.

  • Property price £600,0000% on the first £500,000; 5% on the next £100,000 - total bill of £5,000 (previous bill £20,000)
  • Property price £750,000 0% on the first £500,000; 5% on the next £250,000 - total bill of £12,500 (previous bill £27,500)
  • Property price £1m0% on the first £500,000; 5% on the next £425,000; 10% on the remaining £75,000 - total bill of £28,750 (previous bill £43,750)

Does the stamp duty cut apply to buy-to-let?

If you're buying an investment property or second home, you'll still need to pay the 3% stamp duty surcharge, but this will be on the new temporary rates - so you could still make big savings.

The temporary rates for buy-to-let and second home purchases are shown below.

Portion of property pricePercentage
Above £1.5m15%

Before today, if you bought an investment property for £250,000, you'd have paid 3% on the first £125,000 and 5% on the second £125,000, resulting in a stamp duty bill of £10,000.

From today, you'll only pay 3% stamp duty on the whole purchase price, meaning a bill of £7,500 and a saving of £2,500.

Stamp duty changes in Scotland

The Scottish government announced it will temporarily change its Land and Buildings Transaction Tax (LBTT) rates, effective from 15 July.

Rather than kicking in on purchases over £145,000, LBTT will only apply on purchases of more than £250,000 until 31 March 2021.

The government says this means someone buying a £250,000 property will save £2,100 in LBTT - and that 80% of properties in Scotland will be exempt from LBTT entirely.

Those purchasing buy-to-let properties can also benefit from the changes, but they will still need to pay the 'additional dwelling supplement' of 4%.

Stamp duty changes in Wales

On 14 July, the Welsh government announced it will temporarily change its Land Transaction Tax (LTT) thresholds.

From 27 July until 31 March 2020, LTT will only apply on transactions of more than £250,000, rather than the current level of £180,000.

The Welsh government says this will mark a saving of £2,450 on property purchases worth £250,000 - and the change means 80% of transactions will now be exempt from stamp duty.

The reduction will not apply to purchases of additional properties, such as buy-to-let and second homes.

The government says these changes will release £30 million towards funding the construction of energy efficient social housing in Wales.

This story was first published on 8 July. It has since been updated with information on Wales' LTT rate changes on 14 July.