There are two new deadlines by which you can take advantage of the Stamp Duty holiday in England – if you complete your purchase by 30 June 2021, you can get 100% tax relief on main residence purchases up to £500,000.
If you complete by 30 September 2021, you get 100% tax relief on main residence purchases up to £250,000 (first time buyers will continue to get their standard relief on purchases up to £300,000 after 30 June). From 1 October 2021, the tax free allowance (‘nil rate band’) will revert immediately back to £125,000.
The extension was announced on 3 March by Chancellor, Rishi Sunak, in the Spring Budget.
For property purchases in Wales, the Welsh Government announced on 3 March that it is extending the Land Transaction Tax holiday to 30 June. This means that residential buyers in Wales will not have to pay any tax on main residence purchases up to £250,000. From 1 July, the nil rate band will revert immediately back to £180,000.
Why are the extensions needed?
In July 2020, the UK was recovering from the first wave of the Covid-19 pandemic. The housing market had reopened, however continued coronavirus restrictions and ongoing damage to jobs and businesses meant that buyers were being cautious.
To support the housing market during this difficult time, Rishi Sunak introduced a Stamp Duty Land Tax holiday for residential property buyers in England and Northern Ireland. Wales followed shortly after, introducing a Land Transaction Tax holiday for residential property buyers in Wales. A similar scheme was also introduced in Scotland in relation to Land and Building Tax.
As soon as the holidays were announced, demand for housing exploded. As a result of the Stamp Duty holiday alone, residential property transactions rose by 14.5% in July, followed by a further 15.6% increase in August.
Average UK house prices also increased by 8.5% in the year to December 2020, the highest annual rise since 2014.
Many at risk of missing the deadline
By January 2021, the market was slowing down as people realised that they would be likely to miss the original Stamp Duty and Land Transaction Tax holiday deadline on 31 March.
It also became clear that many buyers currently involved in transactions were at risk of missing the deadline, often for reasons outside their control such as delays further down the chain. Demand for conveyancing and pressure on mortgage lenders also meant that delays were more likely.
Property website, Rightmove, estimated that around 613,000 transactions were ‘stuck in the processing logjam’ with 100,000 at risk of falling through altogether.
Industry experts criticised the ‘cliff edge’ created by the existing deadline whereby a transaction must complete by 31 March to reap the benefits. If you were delayed by a single day, you could face an unaffordable tax bill at the original Stamp Duty or Land Transaction rates.
Experts call for extensions
By late 2020, industry players were already calling for an extension to the property tax holidays. Some believed that the holidays should be extended for all buyers, to carry on supporting the housing market during Covid-19. Others believed that it should be tapered off to allow people who had already exchanged contracts on a purchase to complete.
On 3 March 2021, it was confirmed that the tax holidays in England, Wales and Northern Ireland will be extended for all buyers, not just people already involved in property transactions.
Why take advantage of the Stamp Duty holiday or Land Transaction Tax holiday?
The main draw will be the financial savings – people who would normally pay Stamp Duty could save up to £15,000 and people who would normally pay Land Transaction Tax could save up to £2,450.
This is a huge chunk of money, and will allow many to purchase a home they otherwise would not be able to afford due to deposit requirements.
However, for first time buyers in England, the Stamp Duty holiday has been less beneficial because they were already entitled to first time buyer relief from Stamp Duty on purchases up to £300,000. Combine this with unaffordable house prices, job uncertainty due to Covid-19 and a reduction in low-deposit mortgage products available, buying a house has become even more of an unachievable dream for many.
Mortgage guarantee scheme also introduced in Spring Budget
As well as the Stamp Duty extension, Rishi Sunak also announced a new mortgage guarantee scheme in the Spring Budget. Under the scheme, the government will agree to back 95% mortgages, encouraging lenders to bring these low-deposit mortgage products back to the market. The products should start becoming available from April.
This should help many first time buyers who would otherwise not have a big enough deposit get on the housing ladder.
Get in touch with our expert conveyancing solicitors in Newport
At hpjv, our conveyancing solicitors regularly lend their expertise to a wide range of property matters, including buying and selling your home.
We are accredited by the Law Society for the Conveyancing Quality Scheme, which is a marker of our independently recognised expertise.
We can help you progress your property purchase as quickly and efficiently as possible, bearing in mind the Stamp Duty holiday or Land Transaction Tax holiday deadline ahead.
For more information, or to speak to one of our residential conveyancing solicitors in Newport, give us a call or fill in our simple online enquiry form and a member of our team will be in touch shortly.