As life begins to return to a semblance of normal, one of the most impactful covid measures comes to an end this month. Introduced last July to buoy up a flagging housing market, and extended in March’s budget, the stamp duty holiday reaches its finale on 30 September.
If you are in the process of buying a property then you may still benefit if your purchase completes before 30 September 2021. However, if not, you need to be mindful that usual stamp duty rates come back into effect from 1 October.
Currently, you do not pay stamp duty if the property you are buying is worth under £250,000. If it is worth more, then you pay no stamp duty on the first £250,000 and then 5% on anything above this price. For first time buyers, the 5% tax does not come into effect unless the property is worth over £300,000.
From 1 October, stamp duty tax rates will return to their pre-covid levels: 0% for property worth under £125,000, 2% for the portion between £125,001 and £250,000 and then 5% for the portion between £250,001 and £925,000. At the higher end of the market, stamp duty land tax is 10% for properties worth £925,001 to £1.5m and 12% for properties above £1.5 million.
As an example, if you buy a property for £275,000, you would currently pay £1,250 in stamp duty with the £25,000 over the £250,000 threshold being taxed at 5%. After 1 October, however, this cost would increase to £3,750 as you would pay 2% (or £2,500) on the portion between £125,001 and £250,000 and 5% (or £1,250) on the remaining £25,000.
Stamp duty has always been an unpopular tax as it penalises those who have to move home for work, want to downsize, or have a growing family. The introduction of the stamp duty holiday coincided with an unprecedented demand for larger, out of city properties and helped push house prices to record levels as demand far outstripped supply in people’s rush to beat the holiday deadlines. Whether the end of the relief period will see prices fall again is not known, but it is thought that continuing demand will see them at least stabilise for a period.