With the stamp duty holiday officially coming to an end on September 30th 2021, October sees a return to normality for home buyers when it comes to paying tax. But, let’s break the facts, figures and terminology down to answer the question that’s on everyone’s lips: how will the end of the stamp duty holiday affect me?
Stamp Duty – what is it?
Stamp duty refers to the tax you must pay when buying a home above a certain value. It’s fairly far-reaching in umbrella terms of the type of property covered by this charge – it includes freehold properties, new or existing leaseholds, shared ownership schemes and even land (its full title is Stamp Duty Land Tax (SDLT). The amount of stamp duty you can be expected to pay is subject to different factors, including whether or not you are a first-time buyer, if you are buying a second home, and also if you reside overseas.
What are the charges?
Since July 2020, buyers hadn’t had to pay any stamp duty on the first £500,000 of their purchase price for 12 months.
From 1 July, stamp duty above £250,000 was payable at the following rates:
£0-£250,000 = 0%
£250,001-£925,000 = 5%
£925,001-£1,500,000 = 10%
£1,500,000+ = 12%
From 1 October 2021, rates are due to return to normal. That means the point you to start paying stamp duty will revert back to £125,001:
Why the stamp duty holiday?
Chancellor Rishi Sunak announced the stamp duty tax break in July 2020 as a means to boost the housing market, which had seen a significant dip over lockdown. The government introduced the holiday in the hope that people would feel more confident about buying, selling and renovating, in turn supporting jobs and driving economic growth.
What has been the result of the tax break?
Whilst the tax break has helped over a million home buyers make massive savings on their purchases, as a result, booming sales, a combination of low interest rates, desire for more space amongst those forced to face up to the realities of their cramped accommodations, and the stamp duty holiday have seen house prices soar nationwide. According to published findings from the Office of National Statistics, annual house price growth in England increased by over ten per cent.
What will happen now?
The approaching end to the stamp duty holiday could see a dip in property prices, due to lower demand from those keen to save money on the lowered tax charges.
August was the first month this year which was a fall in asking prices. Rightmove’s analysis showed it was typically from larger homes. Both buyers and sellers at this end of the market have been impacted the most by the end of stamp duty savings from the start of July.
Three and four bedroom homes are still in high demand showing that the stamp duty holiday was not necessarily the biggest motivator for them to move and space internally and externally are still required for many families.
With government furlough schemes set to end in October, this presents further uncertainty, particularly in regard to employment figures.
However, the number of properties for sale is still at a record low and with current interest rates at a low of 0.1%, borrowing rates are more affordable, encouraging borrowing, perhaps a rise in the number of properties coming to market in the Autumn will be seen.
What can I do to prepare?
As the deadline approaches, if you are considering putting your home on the market, you may be concerned about the uncertainty of what lies ahead. There are a number of steps you can take to ensure you are as prepared as can be:
1. Contact an estate agent with a proven track record.
2. Speak with a mortgage advisor as early as possible to find out how much you can borrow and even secure an agreement in principle prior to making an offer on a property.
3. Organise your documentation including deeds, mortgage documents, electricity and gas certificates and EPCs.
4. Research solicitors and be prepared to instruct as soon as your offer is accepted.
At Wainwrights, we strive to keep you as informed as possible throughout the home buying process. From the moment you consider putting your home on the market ‘til the moment you exchange keys, we will be here by your side each and every step of the way. After all, everybody knows that holidays can’t last forever, which is why it’s all the more important to ensure you’re returning to the perfect home.
Get in touch
If you would like more information on the changes or have any questions about selling or buying a home, get in touch.