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Revealed: an expert guide to stamp duty in 2021

Here, in this guide piece, the experts at Alexander & Co - a firm of chartered accountants in Manchester - run through the new expected stamp duty rates from April 1, and what these will mean for property purchases.

It's been a difficult year, but in much better news, it seems that the Covid-19 pandemic has not dampened the spirits of the UK property market. Back in July last year, we saw the government suspending stamp duty tax payments on the first £500,000 of all property sales in the UK. As a result of this initiative, there was an influx of house sales across the nation and it appeared that not even a pandemic could stop people from securing their dream homes. 

Come the new year, it appears that this property market boom is slowly dying down and this is arguably to do with the stamp duty holiday ending on March 31. You may therefore be wondering what this change will entail, which is where this helpful guide comes in. 

What is stamp duty? 

With its holiday set to come to an end soon, let’s refresh our memories on what stamp duty is. Simply put, it is a tax that people in the UK have to pay for the purchase of a property that is over a certain price threshold. The amount that you are required to pay depends on where you are located in the UK, the price of your property, and whether you own multiple homes. 

Stamp duty has to be paid to HMRC 14 days after your purchase your property, and late payments will result in fines. However, there are plenty of professionals that can take care of this process for you, such as the property accountants at Alexander & Co. 


What are the current rates? 

As mentioned, last summer the government announced the temporary increase of the stamp duty threshold to £500,000, and this new figure will run in place until March 31 2021. This means that anyone completing a property purchase of up to £500,000 before this date will not have to pay any stamp suty. Over previous months, this incentive has allowed buyers to save as much as £15,000. 

Currently, the rates on what you must pay in stamp duty tax are as follows: 

  • 0% on the first £500,000 

  • 5% on the next £425,000 (the portion from £500,001 to £925,000) 

  • 10% on the next £575,000 (the portion from £925,001 to £1.5 million)

  • 12% on the remaining amount (the portion above £1.5 million)

What are the new expected rates? 

From April 1 2021, the stamp duty threshold will decrease to the original figure of £125,000. In terms of rates, the range will start at 2% of the purchase price. See these below:  

  • 0% on the first £125,000 

  • 2% on the next £125,000 (the portion from £125,001 to £250,000)

  • 5% on the next £675,000 (the portion from £250,001 to £925,000)

  • 10% on the next £575,000 (the portion from £925,001 to £1.5 million)

  • 12% on the remaining amount (the portion above £1.5 million)

These rates also apply if you bought a property before July 8 2020. 

It is also worth noting that from April 1 2021, overseas buyers who intend to purchase a residential property in the UK will have to pay a 2% stamp duty surcharge. This surcharge will be in addition to the current 3% stamp duty surcharges for the purchase of extra properties, such as second homes and buy-to-lets. 

How can I calculate stamp duty? 

Finally, you may be wanting to get an idea of how much stamp duty you’ll be required to pay after March 31 2021. As addressed before, this will depend on the total market value of your property. For instance, if you buy a house for £275,000, the stamp duty tax you owe is worked out as below:

  • 0% on the first £125,000 = £0

  • 2% on the next £125,000 = £2,500

  • 5% on the final £25,000 = £1,250

Total stamp duty tax = £3,750

All in all, whether you are a landlord looking to invest or a first-time buyer seeking to buy their dream home, stamp duty tax is something you must be aware of. After all, as the future of the property market looks increasingly unclear, the best thing you can do is to make sure you know the procedures and protocols of the market. 

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