After nearly four months of lock-down, the housing market needed something of a shot in the arm to revive it, and the Stamp Duty Holiday recently announced by Chancellor Rishi Sunak might just be the thing that it needs.  But what actually is this holiday, and how will it affect different areas of the market?

A buyer must pay Stamp Duty Land Tax (known as SDLT) if they buy a property or land over a certain price in England and Northern Ireland. The tax amounts are different if the property or land is in either Scotland – where they pay Land and Buildings Transaction Tax – or Wales – who pay Land Transaction Tax if the sale was completed on or after 1 April 2018.  The total value that the buyer pays SDLT on – sometimes referred to as the ‘consideration’ – is usually the total price for the property or land.

Up until now, the SDLT threshold was £125,000 for residential properties and £150,000 for non-residential land and properties. However, with the COVID-19 pandemic hitting the housing market hard, the Chancellor decided that special treatment was needed to help revive it and get it going once more.

The stamp duty holiday gives home buyers an eight-month window from its start date to purchase a property costing up to £500,000, tax free, and anyone buying a home costing more than that will get a stamp duty discount of £15,000 compared to the sum they would pay under normal circumstances. The Government website has a stamp duty calculator to tell you exactly how much you will be charged during your home purchase.

These new changes came into effect on the 8^th of July 2020, and will run through until the 31^st March 2021 – effectively the end of the tax year.

But what exactly will these changes mean to different sectors of the market?

First time buyers. As stated above, the lower limit for stamp duty has been temporarily abolished for homes up to £500,000, making it very attractive to first time buyers. It looks especially good in cities like London where the average first home currently costs £415,000, allowing buyers a potential tax saving of £5,750. 

Current homeowners. If the homeowner is moving but staying under the £500,000 lower limit, they really will be winning, and would pay no stamp duty at all.  They would also pay a much-reduced amount depending upon the cost of their new property, even if the purchase price went over £500,000.

Investors. This is the second group who are likely to see a benefit too, as they benefit from the basic rate of stamp duty being removed (although the 3% enhancement still exists).  If an investor is intent on buying several, lower cost properties, they could be in line for big savings on stamp duty. And furthermore, the stamp duty changes are expected to push up city house prices as sellers are likely to raise their asking prices, and other investors or home movers aren’t likely to worry too much, particularly if the property is still under the half a million pounds lower limit.

If you are first time buyer, a potential home mover, or an investor, come and chat to us at Grange Mortgages, and see how we can help you.