Stamp Duty Holiday: Everything you need to know

Chancellor Rishi Sunak has announced a stamp duty holiday for property buyers in England and Northern Ireland, effective immediately. 

On July 8th 2020, in what many called a “mini budget”, Chancellor Rishi Sunak announced that England and Northern Ireland will enter into a stamp duty holiday until March 31st 2021. <

The Chancellor stated that the changes are effective immediately, as he looks to revive Britain’s coronavirus-hit economy. He estimates that this move will save the average property buyer £4,500.

The Treasury expects the plans to cost £3.8bn but has insisted the new measures are there to “maintain the growing momentum since the easing of lockdown” in the property market.

Forming part of his Summer Statement, Sunak declared:

We need people to feel confident, confident to buy, sell, move and improve. That will drive growth, that will create jobs. So, to catalyse the market and boost confidence I have decided today to cut stamp duty.

What is stamp duty?

Stamp Duty is a tax paid by property buyers. The amount you pay depends on the cost of the property being bought, the area of the UK, and whether or not you are a first-time buyer. 

Historically, in England and Northern Ireland, buyers will pay Stamp Duty Land Tax (SDLT) on properties sold for more than £125,000. For first-time buyers, this tax threshold is significantly higher at £300,000.

It is always the buyer who pays stamp duty, not the seller. Normally, your solicitor or conveyancer will calculate and pay your stamp duty on your behalf. They will usually collect the amount owed from you in advance and then submit your return and pay the stamp duty on completion day.

You have 14 days after you complete on the purchase of a property to file a return to HMRC and pay any stamp duty that is owed. 

Amount received by the Treasury from Stamp Duty

What are the changes to stamp duty?

The biggest change announced by the Chancellor was an increase in the tax relief threshold rising from £125,000 to £500,000. This means until March 31st 2021, buyers will not pay any Stamp Duty on properties worth up to £500,000.

The new SDLT rates:

When do the stamp duty changes come into effect?

The changes come into effect immediately and will last until March 31st 2021. The changes cannot be applied retrospectively. 

What happens after 31st March 2021?

It is expected that from April 1st 2021, the previous SDLT rates will be reintroduced. The rates that SDLT would return to are:

What do the changes to SDLT mean for the property market?

The move by Rishi Sunak has been praised in some corners and criticised in others. Many experts say that buyers with bigger deposits that are looking to purchase a home in more expensive areas will benefit the most from the tax cut. 

First-time buyers are also set to benefit, which could continue the trend of the property market picking up since it slumped at the beginning on lockdown between March and April this year. 

Legal & General Mortgage Club director, Kevin Roberts, said of the changes: 

The latest stamp duty holiday proposals look to be another step in the right direction and make for positive reading for first-time buyers. 

Our new research suggests that first-time buyers could be the engine that drives the housing market forward this year, with 93 per cent still planning to purchase a property in 2020.

However, critics have been quick to point out that this fix might simply be plastering over cracks within the property market. CEO of Andrews Property Group, David Westgate, has warned of a “boom scenario” between now and April 2021. Westgate is worried about a “disproportionate number of people buying at higher prices. He stated:

Cliff-edge deadlines completely distort the market and rarely benefit the consumer.

In addition to this, many are angry that the measures have not been backdated, to at least the start of lockdown. It may come as a bitter blow to those who have completed on their purchase during lockdown or in the immediate aftermath and are set to miss out on the tax holiday. 

Shadow Housing Secretary, Thangam Debbonaire, has labelled the changes an “unnecessary subsidy for second homeowners”. 

The Labour MP has said the money saved by property buyers would be more suited to fixing shortfalls in local council finances during the pandemic. 

He [Sunak] should be targeting support to those who need it, not helping people invest in buy-to-let properties and holiday homes.

Debbonaire also argued it would “worsen the housing crisis” by reducing the supply of first homes.

Whichever way the SDLT holiday is viewed, it is certain to increase activity in the property market between now and April 2021 from those who wish to take advantage of the change.

How can Percy Hughes & Roberts help?

At Percy Hughes & Roberts, our residential conveyancers help hundreds of people each year to move house. Our team can talk you through the legal process of buying your new home, whether you are a first-time buyer or a seasoned property owner. We can also discuss the new Stamp Duty rates and give you advice in relation to how it is paid and when. 

Each residential purchase or sale is dealt with from instruction to completion by the same conveyancer, so you always know who to talk to throughout the process.

If you would like any more information regarding property sales and purchases, you can contact our expert conveyancers by calling 0151 666 9090 today or by completing the "Get in touch" form. Click here for more information.