The Salary Calculator

Stamp duty in the UK

by Madaline Dunn

Stamp duty has hit the headlines recently, following the end of Chancellor Rishi Sunak’s end-of-June stamp duty holiday deadline. Reports have highlighted that transactions have slumped after a surge of homebuyers taking advantage of the government’s housing market policies.

So what exactly is stamp duty, and what does the end of the stamp duty holiday mean for homebuyers and the housing market?

At The Salary Calculator, we’ll walk you through:

• What stamp duty is
• When stamp duty applies
• How much stamp duty costs
• When you must pay stamp duty
• What the stamp duty holiday was
• What the end of the stamp duty holiday means for the housing market

What is stamp duty?

Stamp duty, or Stamp Duty Land Tax (SDLT), refers to the tax you must pay to HM Revenue & Customs when purchasing a residential property or piece of land in England or Northern Ireland.

When does stamp duty apply?

Standard stamp duty applies to those purchasing a property valued at £125,000; that said, this does not apply to first time buyers unless their property is valued at over £300,000. Those who are purchasing a second property are also required to pay stamp duty, although the amount you pay here can be claimed back if you sell your first property within three years.

Exemptions apply where a portion of one’s home is transferred to a spouse or partner after a separation or divorce, or an individual inherited a property in a will.

How much is stamp duty?

The amount of stamp duty one pays is dependent on a property’s purchase price and is tiered in the same way as income tax. This is as follows for the period between 1 July 2021 – 30 September 2021:

For England and Northern Ireland:

• The stamp duty rate for a main residence property valued at between £180,001 – £250,000 is 0%. For those with additional properties, a 3% surcharge is applied to the entire purchase price of the property
• The stamp duty rate for a main residence property valued at between  £250,001 – £925,000 is 5% and rises to 8% for additional properties
• The stamp duty rate for a main residence property valued at between £925,001 – £1,500,000 is 10% and rises to 13% for additional properties
•  The stamp duty rate for a main residence property valued at over £1,500,001 is 12% rising to 15% for additional properties

For Wales from 1 July:

• The stamp duty rate for a main residence property valued at between £180,001 – £250,000 is 3.5% and rises to 7.5% for additional properties
• The stamp duty rate for a main residence property valued at between £250,001 – £400,000 is 5% and rises to 9% for additional properties
• The stamp duty rate for a main residence property valued at between £400,001 – £750,000 is 7.5% and rises to 11.5% for additional properties
• The stamp duty rate for a main residence property valued at between £750,001 – £1,500,000 is 10% and rises to 14% for additional properties
• The stamp duty rate for a main residence property above £1,500,000 is 12% and rises to 16% for additional properties

For Scotland from 1 April:

• Land and buildings transaction tax rate for a main residence property valued at up to £145,000 is 0% and rises to 4% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £145,001 – £250,000 is 2% and rises to 6% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £250,001 – £325,000 is 5% and rises to 9% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £325,001 – £750,000 is 10% and rises to 14% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at over £750,001 is 12% and rises to 16% for additional properties

When must you pay stamp duty?

When buying a property in the UK, it’s a legal requirement to pay your stamp duty within 14 days of the date of completion/date of entry. After this timeframe, interest may be applied, and you may be hit with a fine. This follows legislative changes introduced in 2019.

What was the stamp duty holiday?

The stamp duty holiday was introduced back in July 2020. This tax cut was introduced to stimulate the property market amidst the Covid-19 pandemic and make it more accessible to homebuyers. It resulted in savings of up to £15,000 for around 1.3 million homebuyers.

Although the stamp duty holiday was set to expire in March, it was extended until June 2021. Temporary stamp duty rates are now higher than before and apply between July to September. Standard stamp duty rates will apply from 1 October 2021 onwards.

Standard rates for England and Northern Ireland are as follows:

• The stamp duty rate for a main residence property valued at up to £125,000 is 0% and 3% for additional properties
• The stamp duty rate for a main residence property valued at between £125,0001 – £250,000 is 2% and rises to 5% for additional properties
• The stamp duty rate for a main residence property valued at between £250,001 – £925,000 is 5% and rises to 8% for additional properties
• The stamp duty rate for main residence property valued at between £925,001 – £1,500,000 is 10% and rises to 13% or additional properties
• The stamp duty rate for main residence property valued at £1,500,001 and over is 12% and rise to 15% for additional properties

What does the end of the stamp duty holiday mean for the housing market?

The end of the stamp duty has been predicted to have some negative effects, such as:

• Buyers pulling out of deals
• A decline in buyer interest, and;
• A drop in house prices

That said, the future is uncertain, and industry experts’ forecasts are varied. Recently, Nationwide recorded a “surprising” 2.1% rise in sold prices, which Robert Gardner, Nationwide’s chief economist, has attributed to a demand for properties between £125,000 and £250,000.

Meanwhile, Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, commented: “We think that house prices will pick up again in 2022, finishing the year about 4% higher than at the end of 2021.”

Tags: coronavirus, Economy, house prices, houses, income tax, recovery, SDLT, stamp duty, The Salary Calculator

Plans for re-starting the economy

by Admin

It has been a turbulent few months for many of us, with jobs being cut, furloughing schemes, working from home and closure of many businesses (small and large). Last week, Chancellor Rishi Sunak announced a number of measures which are designed to help us along the road to recovery. It is going to take several months (or even longer) and things may never quite be the same – but here are a few of the measures which have been announced:

A cut in VAT on hospitality – restaurants and hotels will see the VAT on their goods reduced from 20% to 5%. For consumers, it is possible that this will mean lower prices but businesses are under no obligation to pass this saving on. They may keep their prices the same and use the VAT saving to try to repair some of the damage caused by their enforced closure over the last few months, or to try to allow for fewer customers as social distancing regulations mean that they can’t seat as many people as before.

A temporary removal of stamp duty on house purchases under £500,000 – if you were planning to move house before March 2021, this may well save you a significant amount of money. Previously, any house sold for more than £125,000 attracted stamp duty (often thousands or tens of thousands of pounds) which the buyer had to pay on top of the purchase price. Until March of next year, the threshold has been increased to £500,000, in an attempt to encourage people to buy and re-energise the housing market.

A bonus paid to employers who retain furloughed employees – if an employer keeps an employee who was furloughed on the payroll until the end of January 2021, they will be eligible for a one-off £1000 bonus. This is to encourage employers to keep people on and prevent unemployment, even if business doesn’t pick up immediately now that lockdown has been loosened.

There were several schemes announced which are intended to encourage employers to employ 16-24 year olds.

A full run-down of the measures announced is available from the BBC.

Tags: budget, coronavirus, covid-19, Economy, house prices, houses, Jobs, recession, recovery, VAT

Trying to live cheaply

by Admin

I was interested to read an article on the BBC news website today about the new benefits cap, which was trying to estimate how much money someone needs to be able to live (albeit cheaply). As well as some examples of how people can save a bit of money with cheaper options, it was interesting to me to see things that I wouldn’t necessarily have considered when trying to work out my weekly spend.

For example, they say that the average family spends £9.50 a week on furniture. Now, obviously, most people don’t buy a new piece of furniture each week, and I can’t remember the last time I did – but it is expensive and you will need to budget for some such purchases over the year. You might think that if you were living on a budget you just wouldn’t buy furniture, but it does wear out and does need to be replaced, even if it is replaced with a cheaper, second-hand equivalent.

Also clothing – not something I spend money on regularly, but if you have a job interview you will need a suit – and you’ll have to save for many weeks at a couple of pounds a week to afford it. Things like socks will wear out, shirts will get damaged – if every penny counts, it will be difficult to get replacements, even if you shop in budget shops.

Anyway, check out the link above to read the article in more detail. You might spot somewhere that you could economise!

Tags: benefits, debt, Economy, recession, recovery, unemployment

Rocky road to financial recovery

by Admin

Although the UK entered recession as long ago as the second half of 2008 and officially exited recession at the end of 2009, a full recovery still seems a long way off. This week was one of mixed messages – some good and some bad.

First came the bad news that the Consumer Price Index (CPI) had increased from 4% to 4.5% in April. The CPI is used to measure inflation in the UK and to compare it with the government’s target of 2%. A low level of inflation (like 2%) is a sign of a healthy economy, but higher rates usually mean that the costs of goods and services are increasing faster than workers’ wages, leading to a lower standard of living. For those of us already finding it hard to make ends meet, this is obviously bad news.

On the flip side, however, there was news that unemployment fell in the first quarter of this year. The decrease was only slight, to 7.7% from 7.8% the previous quarter, but it is a promising sign – as is the fact that the number of people in employment has increased to 29.24 million, just short of the pre-recession peak of 29.57 million.

What does all of this mean? Well unfortunately, these numbers are just a small part of the complex system that makes up the British economy and predicting what will happen next is astonishingly difficult – as no doubt you’ve noticed in the past few years. However, it seems that the economy is continuing on its long, slow recovery from the greatest recession in living memory. The recovery appears to be fragile – which is one of the reasons that the Bank of England has left its base rate at 0.5% for the 26th month in a row. You know what they say – slow and steady wins the race!

Tags: careers, Economy, inflation, recession, recovery, unemployment

Holidaying in an overdrawn country

by Admin

I’m in Greece at the moment, a country which has been suffering recently from severe economic problems. Over the past decade the government has taken advantage of the security of being part of the Euro and borrowed more than the country’s total annual revenue. The downturn lead to less advantageous borrowing rates, leaving the country with an increasingly difficult task to repay the loans (sounds like the “sub-prime” crisis but for countries rather than homeowners, doesn’t it?). Cuts in public sector pay and benefits have lead to protests and riots. So does this affect you if you’re visiting the country?

My experience is no. The weakened Euro has helped increase the number of visitors to Greece and its islands, where I am right now. Hotels and restaurants therefore are not short of customers and although I have seen a number of closed establishments, such businesses can fail even in boom times. Prices for meals and drinks remain reasonable – no sign of businesses using inflation to combat financial problems. There have also been no effects of any strikes, although if you were to be relying on public transport you may run out of luck (I have had no problem using the buses here, however).

The holiday resorts, bars, shops and tourist attractions have been as busy as ever and it doesn’t appear that the larger economic problems of the country are having an impact on the day-to-day experiences of a tourist enjoying the hospitality of a popular holiday destination.

Tags: Economy, Foreign Currency, foreign exchange rates, Greece, holiday, holiday money, recovery