Stamped out: What does the tapering of the Stamp Duty holiday mean for homebuyers?
Mortgages
On 30th June, the Stamp Duty holiday will start to be phased out, marking the end of a helpful, year-long policy for homebuyers. With the end now in sight, it’s been widely speculated that many people looking to take advantage have been trying to complete their property purchase ahead of the cut-off point.
But, what exactly is the Stamp Duty holiday? And what does its ending mean for buyers going forward? In this blog post, we’re going to take a look at these points, as well as some other key details about the holiday.
What is Stamp Duty?
Stamp Duty — or Stamp Duty Land Tax (SDLT) to use its full name — is the tax that you may have to pay when you buy a residential property or piece of land in England and Northern Ireland. Whether and how much you pay depends on the price and your own circumstances as a buyer.
SDLT is calculated in bands that are based on the price of the property, where you’ll pay tax on a percentage of the price within the band. For example, if you were buying a home for £550,000 under non-holiday rates you’d pay 0% of the first £125,000, but then 2% of the price from £125,001 to £250,000 (£2,500) and 5% of the price from £250,001 to £550,000 (£15,000). This means you’d pay £17,500 in total on £550,000.
Depending on your circumstances, you might pay more, less or even no Stamp Duty. For instance, someone buying their first home may receive relief that lowers or removes the Tax, while another person purchasing a second home is likely to pay more SDLT.
What is the Stamp Duty holiday?
In July 2020, the Government announced that it would be cutting Stamp Duty to boost the housing market in the wake of the first COVID-19 lockdown. The original end date for the holiday was 31st March 2021, but this was extended until 30th June. Any buyers looking to squeeze into the holiday need to have completed by the deadline.
During the holiday, the amount of tax paid on residential properties up to £500,000 was reduced to 0% in the lowest band. This was appealing to a lot of people, as they would otherwise usually pay SDLT on property priced over £125,000. As a result, the property market bounced back as buyers looked to make use of the holiday.
Here are the Stamp Duty holiday rates (plus rates for additional properties) and bands that will be valid until 30th June:
| Property price band | Stamp Duty rate | Additional properties |
|---|---|---|
| Property price up to £500,000 | 0% | 3% |
| £500,001–£925,000 | 5% | 8% |
| £925,001–£1.5 million | 10% | 13% |
| Above £1.5 million | 12% | 15% |
What happens after the Stamp Duty holiday?
From 1st July, the Stamp Duty holiday’s lower rates and higher thresholds will be phased out. This will be done in two stages: from 1st July to 30th September rates will remain the same but thresholds will be reduced, then on 1st October rates and thresholds will return to what they were pre-holiday.
Here are the Stamp Duty rates (plus rates for additional properties) and bands that will commence from 1st July–30th September:
| Property price band | Stamp Duty rate | Additional properties |
|---|---|---|
| Property price up to £250,000 (£300,00 for first-time buyers) | 0% | 3% |
| £250,001–£925,000 | 5% | 8% |
| £925,001–£1.5 million | 10% | 13% |
| Above £1.5 million | 12% | 15% |
Here are the regular Stamp Duty rates (plus rates for additional properties) and bands that will be reintroduced from 1st October:
| Property price band | Stamp Duty rate | Additional properties |
|---|---|---|
| Property price up to £125,000 (£300,00 for first-time buyers) | 0% | 3% |
| £125,001–£250,000 | 2% | 5% |
| £250,001–£925,000 | 5% | 8% |
| £925,001–£1.5 million | 10% | 13% |
| Above £1.5 million | 12% | 15% |
Will buyers completing after the holiday be missing out?
Many people trying to complete a property purchase will have been doing so with one eye on the Stamp Duty holiday deadline. If you’re not able to buy your home in time, it is likely that you will be set to pay more SDLT.
Taking that £550,000 example we used earlier, we’ve already worked out that £17,500 in SDLT would be due under regular rates that will be reintroduced from 1st October. With a completion before the deadline on 30th June, there would only be £2,500 due. If you could finalise the deal before 30th September it would be reduced to £15,000.
However, it’s not all doom and gloom if you’ll miss out on the Stamp Duty holiday. As a lot of people have entered the property market to take advantage, the average price of homes in the UK has reached an all-time high (rightmove), which means it’s pricier to buy a house right now. Some are predicting that house prices will drop off after Stamp Duty returns to normal, so it may be possible to make up for missing out on the holiday.
Will the Stamp Duty holiday be extended again?
It’s looking increasingly unlikely that the Stamp Duty holiday will be extended. There haven’t been any announcements from the Government, and we’re now much closer to the deadline than when the previous extension was unveiled.
Looking to enter the property market soon? Then it’s well worth checking out our range of mortgages, which include products for first-time buyers and those moving home. We even provide options for remortgages and product transfers.