In July 2020 a Stamp Duty holiday was announced, cutting the rate of stamp duty to 0% for properties under £500,000. However, this ‘holiday’ is currently set to end 31st March 2021.
To be able to qualify for the Stamp Duty savings, the property must be sold before this date. As it stands, even if the house is in the selling process with a formal offer received, if the sale is not complete the stamp duty holiday will not apply.
What is Stamp Duty?
Put simply, Stamp Duty Land Tax (SDLT), also referred to as Stamp Duty, is a payment that has to be made by buyers of property or land over a certain price. Buyers have to pay a percentage of overall value and would depend on the value of the property they were buying.
What are the Stamp Duty rates?
The current stamp duty rates are the ones that are due to end 31st March 2021. They are as follows:
| Value | Rate |
| Up to £500,000 | Zero |
| Next portion from £500,001 to £925,000 | 5% |
| Next portion from £925,001 to £1.5 million | 10% |
| Remaining portion above £1.5 million | 12% |
As an example, if you were to complete a house sale during March 2021 that was to the value of £750,000, the stamp duty owed would be:
- 0% on the first £500,000 (£0)
- 5% on the remaining £250,000 (£12,500)
- Total Stamp Duty payable = £12,500
Before the stamp duty holiday that started in July 2020, the rates were as follows. It is expected that these are the rates that Stamp Duty Land Tax will revert to on 1st April 2021:
| Value | Rate |
| Up to £125,000 | Zero |
| Next portion from £125,001 to £250,000 | 2% |
| Next portion from £250,001 to £925,000 | 5% |
| Next portion from £925,001 to £1.5 million | 10% |
| Remaining portion above £1.5 million | 12% |
To show how the amount of Stamp Duty payable would differ, if you were to buy a property with a value of £750,000 in April 2021, it would be calculated as follows:
- 0% on the first £125,000 (£0)
- 2% on the next £125,000 (£2,500)
- 5% on the next £500,000 (£25,000)
- Total Stamp Duty payable = £27,500
The Government website has a calculator to see how much you will have to pay in Stamp Duty Land Tax.
Will the deadline of 31st March be Extended?
As a temporary measure to help the housing market to recover after the impact of COVID-19, the stamp duty holiday is currently set to end 31st March. Chancellor Rishi Sunak has remained quiet as to the future of the stamp duty holiday and has avoided answering questions about it.
Many are calling for him to extend the holiday, with an online petition receiving 140,000 people. Others have suggested that it should be phased out instead of ending abruptly. This forced the Government to debate the topic in Parliament on 1st February.
There is also the call to include ‘formal offers’ in the stamp duty holiday, not just properties that are already nearing the end of sale completion.
What does it mean for you?
If the stamp duty holiday is not extended and you are wanting to buy a home, you could be significantly impacted. For example, if you were looking to buy a property valued at £500,000, buying it during the stamp duty holiday would mean that you wouldn’t pay any stamp duty land tax.
However, if you miss the holiday and buy from April onwards, as it stands, you will have to pay stamp duty of £15,000.
We’re keeping an eye on the situation and aim to keep our customers as informed as possible. If you have any queries, our team at Farr & Farr would be more than happy to help. Simply get in touch with your local office and we can help answer your questions.
