The full stamp duty holiday has now drawn to a close but there’s still a tax break available on the first £250,000 of a property purchase until the end of September.
Chancellor Rishi Sunak extended the stamp duty holiday earlier this year. It meant that buyers in England and Northern Ireland would not have to pay stamp duty on the first £500,000 of property if they complete – in other words, legally transfer ownership – before 30 June 2021.
To avoid a ‘cliff edge’ at the end of this period, the threshold at which stamp duty kicks in then dropped from £500,001 to £250,001 until 30 September 2021.
Normal stamp duty rates will apply from 1 October 2021.
It’s worth remembering that there’s stamp duty relief available for first-time buyers beyond the current stamp duty holiday.
Yes, there’s still a window of opportunity to secure a stamp duty saving. But if you’re looking to complete on your property purchase by the end of September, when the tax break is wound down completely, you’ll need to have your ducks in a row well beforehand.
In a normal year, it would take on average three months from a sale being agreed to completion. But given the uptick in activity over the past year, the average time it takes for a sale to cross the line is now four months.
There’s a number of ways to boost your chances of buying in time, from staying in close contact with your conveyancer, to buying a property via an auctioneer, such as iamsold.
As the full stamp duty holiday on the first £500,000 of a property’s purchase price drew to a close at the end of June, Zoopla calculated that over 50,000 buyers in England could have been at risk of missing out on the maximum savings due to extreme pressure on and delays to the transaction pipeline.
Gráinne Gilmore, head of research at Zoopla, explained: “The busy market is being driven by a once-in-a-generation re-assessment of home as a result of the pandemic.
“This has led hundreds of thousands of households to reflect on how and where they want to live – and they are making a move as a result, with family houses most in demand.
“This trend has been certainly boosted by the stamp duty savings on offer due to the stamp duty holiday, but levels of sales activity in recent months have remained high, with many of these buyers now only expecting the lower, tapered, stamp duty exemption of up to £2,500 because of the longer timeframe to complete a sale.”
The Chancellor originally announced the stamp duty holiday in July 2020 to help kickstart the housing market in England and Northern Ireland following the first national lockdown.
The tax break, combined with many people carrying out a ‘once-in-a-lifetime’ re-assessment of their housing needs in the face of the pandemic, triggered a mini home buying boom.
But the steep spike in housing transactions led to a congested sales pipeline and the home buying process taking longer than usual.
We estimated that around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline.
And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.
The former stamp duty rules will apply from 1 October 2021. This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property.
Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.
For existing homeowners, the rates are:
For example, if you buy a flat for £275,000, the stamp duty you owe would be:
Total stamp duty = £3,750
Read our guide to find out more about stamp duty and how it’s calculated.
Landlords and second-home owners
For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply.
However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%.
It is also possible under some circumstances to claim multiple dwellings relief.
Dig into the detail in our Q&A on the 3% surcharge.
There’s been an additional 2% stamp duty levy on non-UK residents who buy property in England and Northern Ireland since April 2021.
It means that international buyers of second homes could pay up to 17% tax on expensive properties.
The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.
First-time buyers are exempt from paying regular stamp duty on properties costing up to £300,000 and pay 5% on the value of a property between £300,000 and £500,000.
A first-time buyer will pay:
So a first-time buyer purchasing a £275,000 flat would pay no stamp duty.
For a house costing £475,000, a first-time buyer would pay:
Total stamp duty = £8,750
However, if the purchase price is more than £500,000, first-time buyers cannot claim the relief and must pay the standard rates.
For example, a property purchased at £700,000 would result in a stamp duty bill totalling £25,000 even for a first-time buyer.
Stamp duty relief was introduced in November 2017 to help people step onto the property ladder.
Our guide on the first-time buyer exemption has more detail.
You must pay stamp duty within 14 days of completing your property purchase. Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.
The government has a number of schemes available to help buyers. They include:
It’s also a good idea to check out the initiatives and allowances you could benefit from this tax year.
Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland.
Scotland and Wales have equivalent taxes. Similar breaks were introduced but have now ended.
In April 2015, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT).
In Scotland, the LBTT rates are:
First-time buyers pay no LBTT up to £175,000.
Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.
LTT rates are:
The Welsh government introduced an additional charge for second-home owners.
Second home-owners now pay a 4% levy when they buy homes up to £180,000, rising to 16% for homes worth £1.6m or above.