On Wednesday 3rd March 2021, the Government announced in the Spring Budget that there will be an extension to the Stamp Duty Land Tax holiday. Originally introduced in July 2020, the holiday, which was due to end on 31st March, has now been extended by a further three months.
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax set by the government that you incur when purchasing a property over certain price brackets. It is paid as a lump sum on completion.
Before the stamp duty holiday was introduced, when purchasing a property in England, buyers (excluding first time buyers) would have to pay Land Tax on properties or land with a value of £125,000 or more. The rate started at 2% of the property value (not including the first £125,000) with it increasing for different house price brackets.
Stamp duty for first time buyers works slightly differently as the price bracket has a higher threshold. Before the stamp duty holiday, first time buyers would pay Land Tax on properties with a value over £300,000.
What is the stamp duty holiday?
Rishi Sunak first introduced a stamp duty holiday in a bid to help the UK economy amidst the COVID-19 pandemic. The holiday meant a temporary increase on the stamp duty ‘nil rate’ threshold from £125,000 to £500,000, leaving buyers exempt from paying SDLT on properties purchased under the new £500,000 threshold.
This helped the housing market boom in 2020, despite the issues faced with COVID-19 and lockdowns. When first introduced, the Chancellor said that home buyers would make an average saving of around £4,500 from the holiday and the prospect of saving thousands urged buyers to the market.
What is the new extension to the stamp duty holiday
The stamp duty holiday which was due to end on 31st March has been extended for a further three months, staying in place until 30th June. This allows more home buyers to take advantage of the tax break, whether you are already in the process but still to complete, or if you’re new to the market.
In addition to this, Sunak also announced that after 30th June, the bracket to start paying stamp duty will stay at £250,000 until the end of September.
In his budget announcement, Sunak stated: ‘The stamp duty cut has helped hundreds of thousands of people buy a home and supported the economy at a critical time.
‘But due to the sheer volume of transactions we’re now seeing, many purchases won’t complete in time for the end of March.’
The extension therefore provides a much-needed relief for many buyers in the market, who were not set to complete by 31st March, as it allows for more time for purchases to complete.
How does the stamp duty holiday affect first time buyers?
If you’re a first time buyer you already benefit from having a higher house price threshold before paying stamp duty. Although some will benefit from the stamp duty holiday, of more exciting news from the budget, was that Sunak announced a new mortgage guarantee scheme to help first time buyers get onto the property ladder.
In 2020 mortgage providers took their 95% and 90% loan to value mortgages off the market (find more useful information on mortgages here), creating an even bigger barrier for many first time buyers to take their first step onto the property ladder. 90% mortgages have been slowly introduced back onto the market from January 2021, but this new scheme will bring back the opportunity for first time buyers to purchase a house with only a 5% deposit.
This scheme will be available on both new and existing properties, priced up to £600,000 and will run until 31st December 2022.
If you are looking to take advantage of the stamp duty holiday or the mortgage guarantee scheme, get a free conveyancing quote online today.
Disclaimer: The article above is only a rough guide on Stamp Duty Land Tax Holiday.