Posted on July 28, 2021 at 11:50 AM
In case you were unaware, on 1 July 2021, the stamp duty holiday ended, meaning those purchasing property will once again have to pay a land tax relating to their transaction. They are not yet returning to pre-pandemic tax rates. However, the tax reliefs will be gradually reduced over the next few months before returning to full rates on 1 October 2021.
If you are a first-time buyer or are planning to buy a property over the next six months, it’s worth just running over what stamp duty is, how it applies to you, and what you can expect to pay if you are due to complete a purchase before October.
What Is Stamp Duty Land Tax?
When you buy a property or land, you usually pay tax on it, known as Stamp Duty Land Tax. While often referred to as stamp duty, that term is actually only used in England and Northern Ireland. Scotland and Wales, call it 'land and buildings transaction tax' and 'land transaction tax' respectively.
Since 2014, all of the UK have implemented a progressive stamp duty rate system. This means that instead of paying a single rate on the entire property price, depending on the cost of the property you're buying, you might end up paying one rate on a certain portion of the property and a different rate on another. In other words, it works in a similar way to income tax, you incrementally increase the rate of tax you pay as you work your way up the tax brackets.
We will work through some examples shortly, however it’s important to note that, in order to support the housing market during the pandemic, the UK government made changes to the stamp duty system. Initially, there was a complete holiday on the tax for properties costing under £500,000 for twelve months, ending on 30 June 2021, with no stamp duty to pay until a property exceeded the £500,000 threshold.
That holiday has now ceased and rates will gradually rise back to pre-pandemic levels by October.
However, there have been favourable changes in recent years to help first-time buyers stretch their money further. Since 2017, first-time buyers do not have to pay any stamp duty on a Dartford home costing £300,000 or less. That’s more than double the allowance given to those who have already bought a property, which is set to return to £125,000 by 1 October 2021.
What Are the Current Stamp Duty Rates for Buyers in Dartford?
Despite the end of stamp duty relief, there are still some significant savings to be had, especially if your property costs £250,000 or less. Before we work through a couple of examples, let’s look at what the rates are today and what they will look like in October.
From 1 July, stamp duty will kick in above £250,000 (as opposed to £500,000) at the following rates:
£0 - £250,000 = 0%
£250,001 - £925,000 = 5%
£925,001 - £1,500,000 = 10%
£1,500,000+ = 12%
From 1 October 2021, rates are due to return to normal. That means the point you to start paying stamp duty will revert back to £125,001:
£0 - £125,000 = 0%
£125,001 - £250,000 = 2%
£250,001 - £925,000 = 5%
£925,000 - £1,500,000 = 10%
£1,500,000+ = 12%
So now you are aware of the rates you will have to pay both now and in the autumn (when stamp duty rates return to normal), let’s give you a few examples.
How Much Stamp Duty Will I Pay on My New Dartford Home?
Let’s take an example of a semi-detached Dartford home at an agreed sale price of £400,000, and run through the various scenarios to illustrate what you can expect to pay today, after 1 October 2021, and as a first-time buyer.
If you were to buy the property today and you are a first-time buyer, you can expect to pay the following:
You will have to pay £5,000 in Stamp Duty.
As you're a first-time buyer, you pay no stamp duty on the first £300,000 and 5% on £300,001 to £925,000.
Your effective stamp duty rate would be 1.25%.
If you aren’t a first-time buyer:
You will have to pay £7,500 in Stamp Duty.
You pay no stamp duty on the first £250,000 and 5% on £250,001 to £925,000.
Your effective stamp duty rate would be 1.88%.
Let’s look at the same example, but with a completion date after 1 October 2021. As a first-time buyer, your rate would be the same since you receive 100% relief up to the £300,000 threshold and 5% on £300,001 to £925,000.
However, as someone who has previously bought a property, you can expect to pay the following:
You will have to pay £10,000 in Stamp Duty.
You pay no stamp duty on the first £125,000, 2% on £125,001 to £250,000, 5% on £250,001 to £925,000.
Your effective stamp duty rate would be 2.50%.
As you can see, you can save £2,500 by purchasing your Dartford property before the October deadline. While the savings aren’t quite as significant as they once were, we would argue they are still very worthwhile.
Speak to Land Estates Today About Buying Your Next Property Before October
If you are looking to move, there’s no time like the present. Here at Land Estates, we have a healthy stock of houses for sale that suit experienced homeowners and first-time buyers alike. Better still, with our bespoke buying service, we can do all of the heavy lifting for you while trying to find “the one,” speeding up your property search and increase the likelihood of completing before October.
So if you are on the hunt for a new home in the Dartford area and want to ensure you find it during this advantageous stamp duty tax period, then make sure to get in touch with a member of our friendly and approachable team to discuss your requirements.
We are available by phone on 01322 413 501 or via email at firstname.lastname@example.org