Stamp Duty Holiday Explained: What is it and how will it affect you?

16th July, 2020, by Jason Cook ANAEA

On Wednesday, July 8, home buyers were handed a surprise boost as Rishi Sunak announced a temporary holiday on stamp duty. In an effort to revive confidence in the housing market, the government raised the stamp duty threshold from £125,000 to £500,000 in England and Northern Ireland. This provides buyers with a great opportunity to save as much as £15,000, if they are buying a property of up to £500,000.

The change takes effect immediately and will apply for residential properties purchased until 31st of March 2021. No distinction will be made between first-time buyers and second homeowners.


The Chancellor characteristically mentioned:

“I have decided today to cut stamp duty. Right now, there is no stamp duty on transactions below £125,000. Today, I am increasing the threshold to half a million pounds. This will be a temporary cut running until 31st March 2021. And, as is always the case, these changes to stamp duty will take effect immediately. The average stamp duty bill will fall by £4,500. And nearly nine out of ten people buying a main home this year, will pay no stamp duty at all.”

But what is stamp duty and what does these changes practically mean for first-time buyers, or those buying a second home or buy-to-let property?


What is stamp duty land tax?

STAMP duty (SDLT) is a tax anyone buying a residential property or piece of land over £125,000 in England and Northern Ireland has to pay. The rates are different depending on the value, the type of the property purchased – residential, a second home or buy-to-let – and whether you’re a first-time buyer. Below you can see the stamp duty rates that were in effect before the chancellor’s announcement.

Normally, first-time buyers pay nothing on properties up to £300,000 and pay 5% on the portion between £300,001 and £500,000 – they are also eligible for a relief on properties of up to £500,000. In case more than one person is buying a property then all of them must be first-time buyers to qualify for the relief.

For properties costing more than £500,000, first-time buyers are treated similar to those who have bought before meaning that they pay increasing amounts of SDTL depending on the price of the property:

  • 0% SDTL for properties costing less than £125,000
  • 2% SDTL if the property is worth between £125,001 and £250,000
  • 5% SDTL if between £250,001 and £925,000
  • 10% SDTL if between £925,001 and £1,500,000
  • 12% SDTL on any property that is worth more than £1,500,000

Anyone buying an additional residential property (second homes or buy-to-let properties), will usually have to pay an added 3% on top of the normal SDTL rates, as follows:

  • 3% SDTL for properties costing less than £125,000
  • 5% SDTL if the property is worth between £125,001 and £250,000
  • 8% SDTL if between £250,001 and £925,000
  • 13% SDTL if between £925,001 and £1,500,000
  • 15% SDTL on any property that is worth more than £1,500,000

What does stamp duty holiday mean for first-time buyers?

Given that first-time buyers are already exempt from stamp duty on prices up to £300,000, the temporary increase in the stamp duty threshold to half a million pounds will affect those completing on a main residence costing more than £300,000 as they won’t have to pay the 5% SDTL on the portion that’s worth up to £500,000.

As an example, a first-time buyer purchasing a property for £437,000 will now save £6,850 in stamp duty. That is based on 0% duty on the first £300,000 and 5% on the next £137,000 (£6,850).


How will stamp duty holiday affect buying a second home or buy-to-let property?

Similarly, those purchasing second homes or buy-to-let properties will also be exempt up to £500,000. However, they still need to pay the pre-existing 3% surcharge compared to ordinary home buyers meaning that property investors spending less than £500,000 will only need to pay a 3% SDTL on top of the purchase, as opposed to the previous 5%. For properties costing more than £500,000, the stamp duty bands remain unchanged.


You can calculate how much you are liable to pay here.