New Stamp Duty changes - How does this affect you?

As of Wednesday 22nd November 2017, the chancellor introduced new stamp duty changes, that are effective immediately and could eliminate stamp duty for most first-time buyers.

The new rules state that first-time buyers will pay zero stamp duty on the first £300,000 of any home that costs up to £500,000. This means on a home worth less than £300,000, you'll pay no stamp duty.

The changes apply to first-time buyers in England, Wales and Northern Ireland – there's no change for buyers in Scotland.

However, unfortunately there is no change for non-first time buyers/ home movers or for those purchasing second homes/ additional residential properties.

Furthermore, if you are a first time buyer and your home purchase is over £500,000, you will unfortunately miss out on the tax break and therefore, the rules are the same as home movers.

See below existing stamp duty bands vs the new relief for first time buyers.

 

 

 

The break down with examples

So how does this look in real terms? The examples below show how stamp duty could play out for you.

First- time buyer purchase under £300,000 (0% stamp duty)

If you are a first time buyer and purchase a home for £275,000 you pay nothing in stamp duty.

Total stamp duty = £0

First- time buyer purchase under £500,000

If you are a first time buyer and your home purchase is £470,000, you’d pay:

  • 0% on the first £300,000 = £0

  • 5% on the remaining £170,000 = £8,500

Total stamp duty = £8,500

First- time buyer purchase over £500,000

For properties worth more than £500,000 you follow the rules for existing homeowners/ home movers.

So for a property worth £650,000 you’d pay:

  • 0% on the first £125,000 = £0

  • 2% on the next £125,000 = £2,500

  • 5% on the remaining £400,000 = £20,000

Total stamp duty = £22,500

Existing home owner/ home movers

Existing home owners who are moving follow the standard rates of stamp duty (the same as first time buyers purchasing homes over £500,000).

So, for a property worth £275,000 you’d pay:

  • 0% on the first £125,000 = £0

  • 2% on the next £125,000 = £2,500

  • 5% on the remaining £25,000 = £1,250

Total stamp duty = £3,750

Second home buyers/ Buy-to-let purchasers

If you’re buying a second home, or buy-to-let property worth more than £40,000, you have to pay an additional 3% on each of the bands.

So on for an additional home worth £275k, you’d pay:

  • 3% on the first £125,000 = £3,750

  • 5% on the next £125,000 = £6,250

  • 8% on the final £25,000 = £2,000

Total Stamp Duty: £12,000

As you can see for most first-time buyers looking to get onto the housing ladder, these changes will eradicate stamp duty completely, saving as much as £5,000 on home purchases. This is based on the assumption that most first-time buyers are looking to purchase flats and houses valued up to £300k.

Those who are purchasing slightly higher, first time buyer homes will still receive a partial discount and for the higher valued homes (over £500k), there will be no change. This will most likely to be first time buyers purchasing in the London area.

For the rest of us with existing homes, second homes and buy to lets, it’s business as usual.

This is just a quick guide on how the stamp duty changes could affect you. For more information do seek advice from your mortgage adviser. Furthermore, if you have any questions that we can help with, do let us know.