Tuesday 07 September 2021
September marks the last month of Stamp Duty Land Tax (SDLT) savings.
In July 2020 the Chancellor of the Exchequer, Rishi Sunak, announced that the government would temporarily increase the lower limit from where stamp duty on property purchases would be paid, to £500,000. This measure was taken to boost the housing market, which had been hit dramatically by the first lockdown, and to support buyers whose finances were badly affected by lockdown.
The holiday was due to end March 2021 but was extended & a new tapered off discount applied from 1st July to 30th September, decreasing the threshold for savings reduced to a maximum of £250,000.
From 1st October 2021 rates will return to what the pre SDLT discount was as shown in the table below.
This means that from 1st October the residential rate will no longer be 0% up to £250,000, but instead 0% from £0 - £125,000 & then 2% from £125,001 - £250,000.
Although still a saving, as shown above, investors do pay an additional rate of 3% second home SDLT & if you are an investor located overseas an additional 2% will also be charged. These rates are charged on the full property price.
For sellers, the SDLT discount showed nothing but positivity, exacerbating already-low levels of supply and putting upwards pressure on prices. Many buyers have been fighting over the same property, offering above the advertised price to secure the sale.
So, what will happen at the end of the stamp duty holiday?
This remains uncertain; however we can look at what started to happen as the March 2021 deadline was looming with people unsure if an extension was happening…
Ambiguity over missing the original March stamp duty holiday deadline was just another reason for sellers not to list their property. There was also a decline in buyer interest with a RICS survey finding that buyer inquiries fell sharply in Feb 2021. This could mean that the end of the stamp duty holiday could see a levelling off in demand and a return to more normal timescales to complete transactions.
Although some believe that house prices will decline as demand decreases with less competition fighting over one property, February 2021 saw prices continue to be strong, even with the original end date of the stamp duty looming.
More sales will miss the new deadline as existing sales still struggle to be processed with buyers potentially pulling out of deals if purchases can’t be completed by the deadline because they haven’t budgeted for the additional stamp duty.
As we continue to emerge gradually from lockdown, optimism may stay high and the market resilient, however no one knows for certain until we are living in the moment.