Stamp Duty News: What Are The Reduced Rates?

During the first wave of the COVID-19 pandemic, the UK property market suffered and, particularly during the first lockdown, there was a significant slump in property purchases. This crisis was combated by the Government’s introduction of a stamp duty holiday. Consequently, by the time of the second lockdown, the property market was looking much healthier, albeit with viewings being conducted virtually. With savings of up to £15,000 being extended up until 30 September 2021, it’s not surprising that the property market has continued to improve. However, the deadline for this reduced rate is fast approaching, meaning that this is the perfect time to buy a property to avoid the rate changes once October comes around.

What Is Stamp Duty Land Tax & Why Do We Have To Pay It?

Stamp Duty Land Tax was introduced in 2003 and is payable on land transactions. Stamp duty is payable in England and Ireland if you buy any property or land with a purchase price over a certain threshold. Up until recently, a physical stamp was imprinted onto the documents but electronic versions are now preferable. Stamp duty must be paid within 30 days of the completion of purchase or penalties are payable. For property purchases in Scotland and Wales, Stamp Duty Land Tax has been replaced. For property purchases in Wales, Land Transaction Tax is payable. For property purchases in Scotland, Land and Buildings Transaction Tax is payable.

How Is Stamp Duty Calculated?

Stamp duty is calculated based on the purchase price, minus the amount that falls within the nil-rate threshold. However, the amount payable is also dependent on the following factors:

  • If you are a first-time buyer.
  • If you own other property and are buying a further property.
  • If you’re a non-UK resident (2% surcharge if you are a non-UK resident during the 12 months preceding the purchase).
  • If there are additional payments made on top of the purchase price, such as transfer of an outstanding debt.

What Will Happen To House Prices After The Stamp Duty Holiday?

The stamp duty holiday was introduced in July 2020 in an effort to assist buyers whose finances had been detrimentally impacted by the pandemic. The holiday was initially due to end in March 2021 but was extended to July 2021, and a further extension was put in place, taking us to 30 September 2021. One reason for the stamp duty holiday extension was in response to a request from mortgage companies that were struggling to cope with increased demand.

Initially, this tax break meant that where buyers would usually have to pay stamp duty on property prices above £125,000, from July 2020 to June 2021, this threshold was increased to £500,000; from July 2021 to September 2021, this has reduced to £250,000 but is still a significant saving. However, it is incredibly important to complete the purchase of your home prior to the deadline of 30 September 2021, or you will miss out on these savings.

How Much Stamp Duty Must I Pay?

Current stamp duty rates (up to 30 September 2021).

Property Price Stamp Duty Rate
Up to & including £250,000 Nil payable
£250,001-£925,000 5% of the sum above the nil rate
£925,001-£1.5m 10% of the sum above the nil rate
£1.5m+ 12% of the sum above the nil rate

However, after 1 September 2021, the amount payable will increase, and the nil rate will reduce.

Property Price Stamp Duty Rate
Up to & including £125,000 Nil payable
£125,001-£250,000 2% of the sum above the nil rate
£250,001-£925,000 5% of the sum above the nil rate
£925,001-£1.5m 10% of the sum above the nil rate
£1.5m+ 12% of the sum above the nil rate

As an example, if you purchase a property costing £300,000 prior to 30 September 2021, the amount of stamp duty you pay will be £2,500. If you purchase the same property after 1 October 2021, the stamp duty payable will be £5,000.

Multiple Properties/Investment Properties

If you are purchasing more than one property or you already own additional property, you can still take advantage of the tax relief, but a surcharge will be payable. However, it is possible to claim back stamp duty for property you previously lived in & paid the higher rate for.

Shared Ownership

If you purchase a property under a shared ownership scheme – for example, you part-own your property with your housing association – you must pay stamp duty based on the market value of the property above the nil amount, e.g., if the property is worth £300,000 and you pay £150,000 towards it, you will pay 2% stamp duty on the £25,000 that is above the nil rate threshold (£125,000).

 

UK stamp duty holiday

What Is Likely To Happen To House Prices After The Holiday?

In August, it was reported that there has been a 13% increase in residential property purchases, and, although more viewings have been carried out virtually, the property market continues to improve. Due to the savings available to home buyers, there is likely to be a surge in sales immediately before the end date and a sharp dip after the original stamp duty rates resume.

In the long-term, the future looks bright for the UK property market. However, it is possible that property prices will rise in relation to the growing demand and the relatively small supply of homes. It is hoped that this stamp duty holiday will be the catalyst for overall improvement in the property market.

One positive aspect to come out of the pandemic, which most of us can agree on, is a renewed appreciation for nature and for spending time with our families. Consequently, there has been a growth in the number of people seeking properties with large gardens and other open areas. There’s also been an increase in the number of people prepared to commute to work if it means they can live in the leafy countryside. Additionally, as more businesses and employees have seen the benefits of working from home, there is a growing desire for home ownership, which stands to reason: if you’re going to be home all day, you want your home to be a comfortable, welcoming space that you can decorate and adapt to suit your needs.

Are There Any Other Financial Compensations Available To Buyers After The Holiday?

Once the stamp duty holiday ends on 30 September 2021, rates will return to their original state. However, there is still some financial relief available for first-time buyers.

In 2017, the UK Budget introduced relief for first-time buyers, but during the stamp duty holiday, this relief was rescinded due to discounted rates being offered to all buyers. From 1 October 2021, the first-time buyer relief will return, meaning you will not pay stamp duty on properties under £300,000; for properties up to £500,000, you will pay 5% SDLT on the sum above £300,001; for properties above £500,000, you will pay the usual rate of SDLT.

Additionally, a newly introduced government guarantee scheme enables first-time buyers to obtain a mortgage with only a 5% deposit.

Ready To Secure Your Ideal Home? Get In Touch With Us Today!

If you wish to take advantage of these significant savings on Stamp Duty Land Tax, you need to be quick and we are here to assist you. We can help you on the way to early completion, and if there is no chain involved, the process is even quicker.

If you are already purchasing a property with us, speak to one of our friendly agents to discuss the possibility of a speedy completion.

Remember, you must complete the purchase of the property by 30 September 2021 to benefit from this tax relief. Also, take note that a Stamp Duty Land Tax return must still be completed and submitted to HMRC, even if no payment is due. 

Get in touch with us now and we will endeavour to expedite your purchase and can advise you on all property matters.

 

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