The Stamp Duty holiday is coming to an end on Thursday 30 September 2021, which means that Stamp Duty rates will return to their pre-pandemic norms.
The holiday was introduced to boost the housing market, as it was struggling due to lockdowns and the Covid-19 pandemic. According to the BBC, housing transactions in the UK fell to a record low of 42,000 in April 2020.
When it was introduced in July 2020, the holiday meant that no Stamp Duty needed to be paid on the first £500,000 of the purchase price. In July 2021, it was reduced to the first £250,000.
But what are the changes coming to Stamp Duty, and what do they mean for you? Read on to find out more.
Stamp Duty is a tax on the land for properties over a certain value
Stamp Duty has been around for almost 350 years, but the modern iteration was introduced in 1997 by the chancellor at the time, Gordon Brown. It is essentially a tax on property, and the amount you pay depends on the purchase price of your home.
As a result of the pandemic, from July 2020 to July 2021, no Stamp Duty was charged on the purchase of a new home valued at under £500,000 in England and Northern Ireland.
In July 2021, the government extended the Stamp Duty holiday until 30 September, but the value at which you had to start paying was reduced to £250,000.
The tax is paid only on the part of your property that exceeds the tax-free limit. For example, if you had bought a £350,000 property in July 2021, you would only pay Stamp Duty on the excess £100,000.
However, if you are a first-time buyer in England and Northern Ireland, then you do not pay any Stamp Duty on purchases up to £300,000.
The tax-free threshold on Stamp Duty is lowering again
Since the Stamp Duty holiday was extended in July 2021, new homeowners have not paid Stamp Duty on the first £250,000 of a property purchase. The amount that you must pay is dependent on the overall purchase price, as shown in the tables below.
Stamp Duty rates from 1 July to 30 September 2021:
| Value of your property | Stamp Duty holiday |
|---|---|
| £0 - £250,000 | 0% |
| £250,001 - £925,000 | 5% |
| £925,001 - £1,500,000 | 10% |
| More than £1,500,000 | 12% |
From Friday 1 October, Stamp Duty will be paid on any property worth more than £125,000 except in specific cases (for example, if you’re a first-time buyer).
Stamp Duty rates from Friday 1 October:
| Value of your property | New Stamp Duty Charge |
|---|---|
| £0-£125,000 | 0% |
| £125,000 - £250,000 | 2% |
| £250,000 - £925,000 | 5% |
| £925,000 - £1,500,000 | 10% |
| More than £1,500,000 | 12% |
Moving home after September 2021 will be more expensive
With the Stamp Duty holiday coming to an end, those who are looking to move home will need to pay more, as the tax-free threshold returns to pre-pandemic levels. This means that moving will cost you the same in Stamp Duty as it did pre-Covid.
Stamp Duty is paid incrementally, and you’ll pay it if you buy a home worth more than £125,000 (unless you’re a first-time buyer as mentioned above).
This means that you will pay 0% Stamp Duty on the first £125,000 of the purchase price, 2% on any amount up to £250,000, 5% on any amount up to £925,000, and so on.
According to the Office for National Statistics, the average house price in England as of July 2021 was £271,000. If you had bought a property worth £271,000 between 1 July and 30 September, you would have paid a total of £1,050 in Stamp Duty. From 1 October, you’d pay £3,550 instead.
You can find Stamp Duty calculators, like this one from MoneySavingExpert, freely available online.
Stamp Duty is different when purchasing additional homes
Stamp Duty payments aren’t the same for everyone. Those looking to buy an additional property and first-time buyers are subject to different rates.
If you’re looking to buy a second home in addition to your primary residence, then you will pay an additional 3% Stamp Duty.
This means that for the first £125,000 of your additional property, instead of paying 0% in Stamp Duty, you will pay 3%. You will then pay 5% up to £250,000, 8% up to £925,000, and so on.
Those who qualify as first-time buyers are given tax relief on Stamp Duty
For first-time buyers, there won’t be much change to think about. First-time buyers are still allowed Stamp Duty tax relief, which means they will not pay Stamp Duty up to the value of £300,000 in England and Northern Ireland.
If their property is valued between £300,000 and £500,000, first-time buyers will pay 5% Stamp Duty on the amount exceeding £300,000.
To qualify for first-time buyer benefits, you must not have owned your own home anywhere in the world before. Unfortunately, this includes inheriting a property, even if you didn’t buy it. However, you can still qualify for first-time buyer benefits if you have owned a commercial property before.
If the property you are purchasing is over the value of £500,000, you will not qualify for first-time buyer tax relief, and you will be subject to the standard rates of Stamp Duty.
If you are unsure exactly how much Stamp Duty you need to pay or how it will affect your move, consider reaching out to us. We can help you to understand your situation and advise you on how to approach it.
Get in touch
If you want to know more about the new rules surrounding Stamp Duty and how it could affect your move, get in touch. Email enquire@london-money.co.uk or call us at 0207 808 4120 to find out more.