The announcement of the stamp duty holiday extension until the end of June is great news for buyers. It gives those who were at risk of not completing on time a bit of breathing space to get their purchases through and still benefit from the tax relief.
It also provides more time for others to buy properties and push the transactions through quickly, which will be another boost to the property market. As well as the extension, a welcome announcement of lower rates until the end of September was made.
So how does this new announcement affect you as a buyer? We’ll detail what the stamp duty holiday means and how you can benefit between now and 1st October.
What is the stamp duty holiday?
The property market struggled last year as a result of the COVID-19 pandemic so the stamp duty holiday was introduced in July to give it a boost. Stamp duty varies within the UK but Stamp Duty Land Tax (SDLT) is levied in England and Northern Ireland. New thresholds came into effect on 8th July 2020 for the SDLT, raising the original property price threshold of £125,000 to £500,000 before this tax is payable by buyers. The temporary SDLT bands are:
- Up to £500,000: 0%
- £500,001–£925,000: 5%
- £925,001–£1.5 million: 10%
- Above £1.5 million: 12%
This means that you can now save £15,000 when buying a property priced at £500,000 in Bexley, for example.
The new thresholds are also beneficial for those buying a second home or a buy-to-let property. Instead of an additional 3% being due, only 3% stamp duty is payable on property prices up to £500,000 and an additional 3% on the thresholds above this amount:
- Up to £500,000: 3%
- £500,001–£925,000: 8%
- £925,001–£1.5 million: 13%
- Above £1.5 million: 15%
Impact of the stamp duty holiday
This stamp duty holiday was originally set to end on 31st March 2021. As hoped, the considerable tax savings to be made proved to be a great incentive for people to buy properties and the market surged. Unfortunately, due to the increased demand and the continued issues with the pandemic, including the current lockdown, resources have become overstretched and thousands of completions have been delayed with no hope of being finalised by 31st March.
As a result of this, it was feared many buyers would withdraw from their transactions as they couldn’t afford to pay the higher SDLT rates. In property chains, prices would have to be renegotiated to offset the tax amounts that previously hadn’t been calculated for.
Before the stamp duty holiday, first-time buyers already benefitted from relief up to a purchase price of £300,000. The temporary threshold, however, has allowed them to purchase up to a price of £500,000 without paying SDLT. This is particularly beneficial for those buying in London where property prices are so expensive. With the original deadline looming and property purchases not completing, many first-time buyers have been faced with the possibility of having to find that extra money or withdraw their offers altogether.
The stamp duty holiday extension
In his Budget speech on 3rd March, Chancellor of the Exchequer Rishi Sunak put everyone’s minds at rest when he announced that the stamp duty holiday has been extended for another 3 months. This is a huge relief to those already involved in the buying process. It gives surveyors and solicitors a chance to catch up with their backlogs, which have been made even worse by the current lockdown. Buyers no longer need to worry about losing their tax savings and sellers can relax that they’re not going to lose their buyers.
The new date for the stamp duty holiday to end is now 30th June 2021. If you are already in the process of buying a property, this should be ample time for you to complete and benefit from the tax relief.
In addition to this extension, Rishi Sunak announced that there will be a transition period between 1st July and 30th September during which the nil-rate band will become £250,000. This is double the normal threshold of £125,000, which will only become effective again on 1st October. As an example, if you are buying a property priced at £250,000 in Bexleyheath and complete during this period, you can save £2,500 on stamp duty.
This tapered rate should lead to a smoother return to the original SDLT thresholds. If you are hoping to buy a property and still benefit from some stamp duty tax relief, now is the time to move forward with your plans.
How are Wales and Scotland affected?
In Wales, the government has confirmed that the Land Transaction Tax (LTT) holiday will also continue until 30th June. Until then, buyers can benefit from tax relief for property prices up to £250,000. However, buyers won’t benefit from a transitional period at the end of the tax holiday before the rates return to normal.
Currently, the holiday for Land and Buildings Transaction Tax (LBTT) in Scotland is still set to end on 31st March 2021. If you are in the process of buying a property in Edinburgh, for example, you can take advantage of the tax relief available up to £250,000 as long as you complete by that date.