If you’re thinking of moving, or are already in the process of doing so, you’ll no doubt be aware that the stamp duty holiday came to an end on July 1st. You may not, however, be entirely sure of what the changes mean and how they’ll affect buyers, like yourself, moving forward.
This post is here to clear all that up.
We’ll look at the new rates, explain what they mean for buyers, including first-timers and those purchasing second homes, and explore the impact that the stamp duty holiday had on the market.
So, without further ado, let’s get to it.
What changed for buyers on July 1st?
The stamp duty holiday was introduced back in July last year (2020) and it meant that buyers didn’t have to stump up any stamp duty land tax on the first £500,000 of their home purchase. That all changed last Thursday.
Now, the £500k relief has been brought down to £250,000, and the following reduced rates apply:
- £0 to £250,000 = 0%
- £250,001 to £925,000 = 5%
- £925,001 to £1,500,000 = 10%
- £1,500,000 and over = 12%
These rates will remain in place (unless further changes are announced by the government) until September 30th 2021. From October 1st onwards, they will return to their pre-July 2020 levels, which means the nil rate band will drop back down to £125,000.
So, from October 1st 2021, the stamp duty rates will look like this:
- £0 to £125,000 = 0%
- £125,001 to £250,000 = 2%
- £250,001 to £925,000 = 5%
- £925,000 to £1,500,000 = 10%
- £1,500,000 and over = 12%
How does the change in stamp duty affect first-time buyers?
During the stamp duty holiday, first-time buyer relief was replaced by the reduced rates the government introduced. As of July 1st, however, first-time buyers buying a home up to £500k will once again be eligible for discounted stamp duty rates.
For first-time purchases of £500,001 and above, the standard stamp duty rate will apply.
- £0 to £300,000 = 0%
- £300,001 to £500,000 = 5%
- £500,001 and over = Standard rates apply
And those buying second homes?
All of the above applies to those buying property as their main residence, but buying an additional property means you’ll incur a greater rate of stamp duty. Here’s what those buying second homes will pay from July 1st through to September 30th:
- £0 to £250,000 = 3%
- £250,001 to £925,000 = 8%
- £925,001 to £1.5 million = 13%
- £1.5 million and over = 15%
As with main residency purchases, the stamp duty on second homes will revert back to the pre-July 2020 rates:
- £40,001 to £125,000 = 3%
- £125,001 to £250,000 = 5%
- £250,001 to £925,000 = 8%
- £925,001 to £1.5 million = 13%
- £1.5 million and over = 15%
Why was there a stamp duty holiday in the first place?
The short answer can be summed up in one word: Covid.
The government brought the changes in to help those affected by the pandemic, bolster the property market, and boost the UK economy as a whole. Those lucky enough to complete within the holiday window may have saved anywhere up to £15,000.
Did the stamp duty holiday work?
If viewed as a stimulus, there’s no doubt the stamp duty holiday gave the property market a kickstart when it was introduced back in July 2020. House prices surged during this time, which may not have happened were the reductions not put in place.
The property market, however, is a complex beast. So, while the SDLT holiday played a part, the extent to which it impacted things is hard to properly assess. The pandemic itself, Brexit, low mortgage rates, and the ever-present supply and demand problems faced by the UK housing market all had a role in this, too.
What happens next will be telling. The jury is out on whether house prices will plummet now the holiday is over, with some experts predicting drops of 5%, while others forecast further rises in a similar range.
Without a crystal ball, it’s impossible to predict exactly what will happen as we move through the latter half of the year, but it’s sure to be interesting.
Thinking of moving in or around the capital? Put your trust in Petty’s! Whether you’re buying or selling in the heart of London, the East End, or West Essex, we can help.
Petty Son and Prestwich have been serving the good people of E11 and beyond since 1908, so we know a thing or two about the local property market. Our sales team work tirelessly to keep your move moving forward and our family run business prides itself on putting you, our clients, first.
So, if you are looking to buy or sell property, give our friendly team a call to find out exactly how we can assist you with your next move.
