If you’re wondering about the new Stamp Duty holiday deadline, and the effect it is having on the property market, you’re in the right place…
The housing market has continued to defy expectations over the past year, fuelled by people’s desire to move to homes with gardens and with space to work from home. All of these moves have been boosted by the Stamp Duty holiday. The nil rate band of £500,000 will end in June 2021 and will then be tapered until the end of September in order to smooth the transition back to the usual rates.
There was worry that many homebuyers would not complete their purchases in time if the holiday was not extended beyond the March 31 deadline. There is still a concern. In fact, 62% of home movers are still not confident they will complete their move in time for the June deadline (Countrywide data). And more than half of home movers think the Government could have done more to support movers.
We outline the current tax changes, discuss what the implications of the end of the holiday will be on property sales, as well as whether Stamp Duty should be scrapped altogether.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is the tax that must be paid when you purchase a property. The amount of money required for Stamp Duty depends on the overall price of the property as well as factors like whether it is residential or non-residential and whether or not you are a first-time buyer.
How much would you usually pay in Stamp Duty?
If the property is worth between £125,001 and £250,000, the Stamp Duty land tax rate is 2%. So if the property was valued at £250,000, you would have to pay an extra £2,500 in Stamp Duty tax. For the next £675,000, the rate is 5%. If the property you were purchasing was valued between £250,001 and £925,000 bracket, you would not pay any Stamp Duty on the first £125,000, but would pay a 2% rate on the next £125,000 and would pay a 5% rate on the following £675,000. So, as you can see, the tax charges add up. Under the extension, there is absolutely no stamp duty tax on homes up to £500,000. The next portion of the property's price (£500,001 to £925,000) will be taxed at 5%, and the portion after that (£925,001 to £1.5m) at 10%. The table below demonstrates what the current legislation means for homebuyers.