When does the stamp duty holiday end?
18/02/21
When you buy a residential property above a certain price in England and Northern Ireland, you must pay Stamp Duty Land Tax (SDLT).
This differs if you are in Wales, where a Land Transaction Tax is levied after replacing Stamp Duty back in April 2018.
You pay Stamp Duty or Land Transaction Tax in Wales, when you:
- Buy a freehold property.
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house.
Normally, you don’t have to pay Stamp Duty if the value of the property is below a certain figure.
At the moment, the SDLT threshold for residential properties is £500,000.
That is because the treasury introduced a Stamp Duty holiday last July.
Once it ends on March 31 2021, new thresholds for buyers will be introduced.
If you are buying a property in Wales, the current LTT threshold is £250,000 for residential properties purchased at the main rates, and £225,000 for non-residential land and properties. The threshold is lower because prices in Wales tend to be less expensive than those in England.
The LTT is tiered, meaning you pay the appropriate rate of tax for different portions of the house price.
That means even people purchasing homes for more than £250,000 have benefited from a £2,450 saving.
What is the Stamp Duty holiday?
The Stamp Duty holiday came as a response to the coronavirus pandemic in order to boost the hard-hit housing market (although some property experts called for the total abolition of Stamp Duty long before 2020).
From July 8 2020 until March 31 2021, the Stamp Duty threshold increased to £500,000 for property sales in England and Northern Ireland.
This means that anyone completing a purchase on a main residence costing up to £500,000 before the deadline will not pay any Stamp Duty.
Meanwhile, more expensive properties will only be taxed on their value above that amount.
The holiday has saved buyers as much as £15,000, if they are buying a property of £500,000 or more, and has indeed benefited the property industry which was suffering as a result of lockdown.
For Wales, the LTT holiday began on July 27 and it also end on March 31.
What will Stamp Duty thresholds be when the holiday ends?
On property purchases from April 1 2021, the SDLT thresholds will be:
- £125,000 for residential properties
- £150,000 for non-residential land and properties
These are the thresholds that were in existence before the Stamp Duty holiday began last summer.
First-time buyers
From April 1 2021, first-time buyers get a discount (relief) that means paying less or no tax under certain criteria.
This applies if:
- You, and anyone else you’re buying with, are first-time buyers
- The purchase price is £500,000 or less
You’ll also be eligible for this discount if you bought your first home before July 8 2020.
What will LTT thresholds be when the holiday ends?
The starting LTT threshold for residential property in Wales is £180,000.
Do I have to pay Stamp Duty if I don’t complete before the deadline?
Many prospective home buyers who are mid-transaction are almost certainly getting worried that if they don’t complete on time they will suddenly have a hefty Stamp Duty to pay.
As Stamp Duty is only paid out upon completion, if a home isn’t completed before the March 31 deadline hits it would appear normal rates of Stamp Duty would then apply.
This would be the case even if the purchase has been in motion for some time and had started while the holiday was in place.
Certainly, this will result in a scramble to get everything sorted out before the deadline.
There are further worries for the industry that if people can’t complete before March 31, many purchases could suddenly become unaffordable and fall through, causing entire property chains to collapse and this will impact on a housing market that is already suffering.
The solution for many will be for the Chancellor of the Exchequer to take action to avoid a sudden cliff-edge situation where everyone selling a house is trying to race past the finishing line at the same time.
For many, this means calling for the Stamp Duty holiday to be extended to avoid this situation and as a result, 14 trade bodies have called on the Chancellor to grant a stamp duty holiday extension.
An extension to the stamp duty holiday, for at least another six months beyond its current March 2021 deadline, is almost certainly the preferred course of action for both buyers and sellers during the Covid-19 pandemic.
Not only that, but industry insiders insist that this would have wider benefits for the economy as a whole.
“Moving to a new home has enormous knock-on benefits for the wider economy and a continued holiday on property tax would increase consumer confidence and encourage both upsizing and downsizing” says the National Association of Estate Agents.
How has the Stamp Duty holiday affected sellers?
You’d think that the buyer would be the one profiting from a Stamp Duty holiday, as it is they who pay the tax, but it has also had an impact on those selling their homes.
Knowing that buyers won’t have to pay stamp duty can be an incentive for a homeowner to keep their asking price high and this is particularly beneficial for those who are selling more expensive properties.
Overall though, both seller and buyer come out on top.
Is Stamp Duty applicable if I am selling a house in Wrexham?
Wales replaced Stamp Duty with a Land Transaction Tax in 2018, but the Welsh Government also reacted during the pandemic by introducing a Land Transaction Tax holiday on July 14 2020.
It meant buyers didn't have to pay the tax if their new home cost up to £250,000 but, just as Stamp Duty will be reinstated in England and Northern Ireland on April 1 2021, so will LTT - unless of course the holiday is extended.
So watch this space.
At Grow Property we have the expertise and knowledge to help you with all your property transactions, so please don’t hesitate to get in touch with us at: http://www.growproperty.co.uk