The chancellor has announced a temporary holiday on stamp duty on the first £500,000 of all property sales in England and Northern Ireland.
The level at which the tax is charged has been temporarily raised until next March to £500,000 to boost the property market and help buyers struggling because of the coronavirus crisis.
The changes have come in with immediate effect.
What is stamp duty?
Stamp duty is a tax paid by people buying properties, although it varies slightly across the UK.
In England and Northern Ireland buyers pay Stamp Duty Land Tax.
In Scotland it is Land and Buildings Transaction Tax, while in Wales buyers pay Land Transaction Tax.
The amount handed to the government depends on where you are in the UK, the price of the property and whether you’re a first-time buyer.
The expected changes to stamp duty will only apply to buyers in England and Northern Ireland.
Who pays stamp duty and how much?
In England and Northern Ireland stamp duty is paid on land or property sold for £125,000 or more.
However, first-time buyers pay no tax up to £300,000 and 5% on any portion between £300,000 and £500,000.
For people who have bought a home before, stamp duty rates are 2% on £125,001-£250,000, 5% on £250,001-£925,000, 10% on £925,001-£1.5m, and 12% on any value above £1.5m.
That means someone spending £248,000 – the average cost of a house – would currently pay £2,460 in stamp duty to move home.
Landlords pay an extra 3% of stamp duty when they purchase a buy-to-let property in England and Northern Ireland.
What has changed?
The government has increased the lower stamp duty threshold to £500,000 for property sales in England and Northern Ireland.
That means any property purchases below the new level will not need to pay stamp duty as long as the deal is completed before 31 March 2021.
People buying second homes and buy-to-let properties will also benefit, but will still have to to pay the 3% extra duty due on the entire price.
The move is aimed at helping buyers who have taken a financial hit because of the coronavirus crisis.
It is also intended to boost a property market hit by lockdown. According to the Halifax, house prices have fallen for four months in a row.
Chancellor Rishi Sunak said: “The average stamp duty bill will fall by £4,500. And nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all.”
When will the stamp duty holiday happen?
It is effective immediately from Wednesday and will last until 31 March next year.
The increase will be temporary to help revive the flagging property market.
However, critics worry it could encourage people planning to buy next year to accelerate their plans to take advantage of the tax break, leading to a potential property demand slump when the stamp duty holiday is over.
Can I still benefit if I’ve already completed a purchase?
The holiday applies from 8 July, which means anyone completing a property purchase before that date will have to pay the full normal stamp duty.