The Chancellor, Rishi Sunak, has confirmed during the Budget that the stamp duty holiday, which was due to end this month, has been extended by three months to 30th June 2021.
Additionally, it has also been announced that once the stamp duty holiday has ended, the nil rate band will then be set at £250,000 until the end of September when it will then return to £125,000.
Upon announcing the measures, the Chancellor commented:
“The cut in stamp duty I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time.
“But due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March.
“So I can announce today the £500,000 nil rate band will not end on the 31st of March. It will end on the 30th of June.”
“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level until the end of September.
“And we will only return to the usual level of £125,000 from October the 1st.”
The stamp duty holiday, which originally came into effect on Wednesday 8th July 2020, exempts most buyers from paying stamp duty on the first £500,000 of all residential property sales in England and Northern Ireland.
The news of the stamp duty holiday extension will come as a welcome relief to many in the property sector, amid concerns that the end of March deadline would create a ‘cliff-edge’, which could have jeopardised hundreds of thousands of property transactions across the country.
In recent weeks, the think tank, Centre for Policy Studies (CPS), has called on the Government to extend the stamp duty holiday, as, following its introduction, it has led to an increase in house sales to the highest level recorded since the financial crisis in 2007.
A CPS report has shown that following a decline in property transaction between April and June 2020, the number of sales increased from 132,090 to 225,870 between July and September and 316,300 for October and December.
Interestingly, the report has also shown that stamp duty revenues increased by 27% for the third quarter of 2020 in comparison with quarter two (£1.1 billion to £1.35 billion). The CPS has indicated that it may rise once more for quarter four due to the continued increase in sales.
What is stamp duty?
When buying a property or a piece land (with or without a mortgage) in England or Northern Ireland, costing more than £125,000 (or over £40,000 for second homes or buy-to-let properties), you have to pay Stamp Duty Land Tax (SDLT).
SDLT is paid to the Government and applies to both freehold and leasehold property purchases.
How much is SDLT usually?
Ordinarily, SDLT is charged as follows:
- 0% for purchases under £125,000;
- 2% for purchases between £125,001 to £250,000;
- 5% for purchases between £250,001 to £925,000;
- 10% for purchases between £925,001 to £1,500,000; and
- 12% for purchases over £1,500,000.
The rules are different for first-time buyers who are entitled to relief for the first £300,000 of SDLT on properties up to a price of £500,000.
Those purchasing a second home or a buy-to-let property pay an extra 3% of stamp duty on top of the charges referenced above.
How does the stamp duty holiday work?
Under the SDLT holiday measures, homebuyers purchasing a property between 8th July 2020 and 30th June 2021 only pay stamp duty on the amount they purchase a property for above £500,000.
As a result, SDLT is currently calculated as follows:
- 0% for purchases up to £500,000;
- 5% on the next £425,000 of the purchase price (£500,001 to £925,000);
- 10% on the next £575,000 of the purchase price (£925,001 to £1.5 million); and
- 12% of the remaining amount (above £1.5 million).
Those purchasing a second home or a buy-to-let property pay an extra 3% of stamp duty on top of the temporary rates referenced above. This benefits people buying a second property worth more than £125,000.
For further guidance on the stamp duty holiday, please click here.
How we can help
For further information regarding the extended stamp duty holiday or to discuss your circumstances, please contact one of our conveyancing solicitors in Derby, Leicester and Nottingham on 0800 024 1976 or via our online enquiry form.