Chancellor Rishi Sunak has extended the current stamp duty holiday in his budget announcement on March 3rd 2021, giving a further opportunity for buyers to capitalise on the temporary reduction in rates.
Since 8th July 2020, reduced rates of Stamp Duty Land Tax (SDLT) have applied to residential properties, a measure that was introduced in response to the outbreak of the Coronavirus Pandemic last year. A residential property purchased between 8 July 2020 and 31 March 2021 that was valued at up to £500,000 became subject to a zero charge in SDLT.
This first stage of the initiative was due to expire at the end of March, but the extension represents a staged withdrawal which means:
- extending to the 30 June 2021 the nil rate band of £500,000.
- introducing a nil rate band of £250,000 for the period 1 July 2021 to 30 September 2021
After that the standard zero rate band for stamp duty will revert to its pre-holiday level of £125,000.
Henry Knight, Managing Director of Springtide Capital, said the whole initiative has given a lifeline to the nation’s property market. There are currently around 234,000 house sales that have already been agreed during the Stamp Duty Holiday that have not yet been finalised. Extending the period of a reduction in rates will ensure those sales can go through without the buyers being penalised.
“The reduction in Stamp Duty Land Tax has undoubtedly been instrumental in keeping the property market afloat during this challenging time. We are pleased that the Chancellor has revised the offering, and trust it continues to have a positive impact on mortgages and our clients” he added.
Before the reduction in rates, SDLT was due on any residential property valued at £125,000 or above. Raising the threshold has encouraged both those looking to upsize and downsize, as well as boosting housebuilding. First time buyers previously were given relief on SDLT up to £300,000 and then 5% on the portion from £300,001 to £500,000. The Stamp Duty Holiday has been hailed as a particular success for first time buyers, allowing them to take their first steps on the property ladder. Regionally, the extension on the 3rd March is set to benefit those living and buying in London and the South-East most, where property prices on average are higher than across the rest of the country.
However, despite the extension, there is an expectation that there could be a sudden increase in new activity, with buyers likely to hit a “cliff edge” further down the line. A second wave of intensive activity may not dissipate the problem of getting all the transactions completed in time and only return the market to the same position it is now, with many buyers waiting to complete.
Henry Knight comments: “I hope the more tapered approach to the end of the holiday will help many avoid the cliff-edge scenario they were facing in the run up to the deadline. The tight deadline was highly stressful for buyers and put a huge amount of pressure on all the individuals involved in getting a house sale completed. Only time will tell if this move will be advantageous, as it will depend on how much new activity will be seen over the next two quarters. I very much hope the problem has not simply been deferred for a few months.”
To discuss your mortgage requirements today contact Springtide Capital on 020 8154 7280.
Sources:
https://www.gov.uk/stamp-duty-land-tax
Stamp duty holiday ‘to be extended until June in Sunak budget’ (msn.com)
https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
Stamp duty: Holiday extension will benefit buyers ‘most’ in London and South East | Express.co.uk