2020 has been an unexpected year, full of uncertainty. To help encourage buyers and get the property market moving, in July the Government introduced a stamp duty holiday which will remain until 31st March 2021.
Want to know what that actually means and how it affects Shared Ownership? Read on.
What is stamp duty?
Stamp duty land tax (SDLT) is a tax which must be paid by a home buyer when purchasing a property. This tax is required on properties in England costing more than £125,000, or for first-time buyers, £300,000. The exact amount is calculated based on the purchase price of your property. For example, a property purchased for more than £500,000 will incur a higher SDLT than a property under this amount.
How does the stamp duty holiday affect costs?
The stamp duty holiday was introduced to help home buyers get onto and climb the property ladder during the current climate. Essentially, it means you now pay zero stamp duty on the first £500,000 of your property purchase. If your home costs above £500,000, you will pay SDLT for the amount above this figure. The diagram below explains this in detail:
|Property or lease premium or transfer value||SDLT rate|
|Up to £500,000||0%|
|The next £425,000 (the proportion from £500,001 to £925,000)||5%|
|The next £575,000 (the proportion from £925,001 to £1.5 million)||10%|
|The remaining amount (the proportion above £1.5 million)||12%|
How does the Stamp Duty holiday affect Shared Ownership?
The great news is that the stamp duty holiday also applies to Shared Ownership, meaning you could purchase a share of a home, and also pay zero stamp duty on the first £500,000 of your property purchase.
For homes over this amount (between £500,001 and £925,000), you must pay 5% stamp duty only on the portion above £500,000.
When purchasing a Shared Ownership apartment or house, there are currently two options available to buyers when it comes to SDLT.
You may choose to pay the stamp duty based on the full value of your property at purchase, or you may decide to pay the stamp duty on just the share that you are buying.
The latter option alleviates costs at the time of completion, but means that costs may be higher if you go on to ‘staircase’ and increase the share you own of your home. This decision should be considered carefully and should be made with advice from your solicitor.
Want to take advantage of the temporary stamp duty holiday?
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