The stamp duty land tax (SDLT) holiday in England and Northern Ireland has started to wind down, with the nil-rate threshold falling from £500,000 to £250,000 on 1 July 2021.
The lower threshold of £250,000 applies to residential purchases in England and Northern Ireland completed on or after this date until 30 September 2021. Different rules apply to transactions in Scotland and Wales.
What does that mean for SDLT rates during the interim period? What will they be after the holiday? And what does the future hold for the SDLT?
SDLT holiday background
When a national lockdown was announced in March 2020, the Government hit the brakes on the housing market and instructed people to delay their home move until after restrictions were lifted.
After that lockdown, things didn’t get better. Job insecurity was rife, spiralling house prices threatened the market and the wider economy, while buyers were hesitant to commit to the potentially biggest investment of their lives.
Attempting to stimulate the residential property market and help those whose finances had been hit by COVID-19, Chancellor Rishi Sunak therefore introduced a SDLT holiday in his summer statement on 8 July 2020, cutting the tax rate on residential purchases of homes worth up to £500,000 in England and Northern Ireland to zero.
The uptake has been impressive as people could save up to £15,000 on their purchase. Between May and December 2020, around 740,000 people were able to take advantage of the tax break 600,000 of whom bought homes worth less than £500,000, paying no stamp duty at all.
On average, home buyers saved £4,660 on their purchase, working out to a collective £2.8 billion saved.
Originally due to end on 31 March 2021, the Chancellor extended the scheme to 30 June 2021 in his Spring Budget, given the huge amount of transitions yet to be completed.
The end of the holiday
That deadline has now passed, marking the beginning of the end to the policy as it winds down in a tapered finish.
This means that tax rates will not revert straight back to what they were last year. Instead, there will be different rates between July to September 2021, after which point rates will return to their pre-pandemic levels from 1 October 2021.
Here is a breakdown of the figures in England and Northern Ireland:
|Residential property price||8 July 2020 to 30 June 2021||1 July 2021 to 30 September 2021||1 October 2021 onwards|
|More than £1.5m||12%||12%||12%|
An extra 3% rate applies to the purchase of an additional residential property above £40,000 and all corporate residential properties.
For first-time buyers who buy their home on or after 1 July 2021, no SDLT will be charged on the first £300,000.
The future of SDLT
We hope that was a clear summary of the future of SDLT rates, but what about the future of this property tax itself?
House prices surged by 9.5% in May 2021 , part of a strong and continuous rise in prices that many attribute, at least in part, to the SDLT holiday.
Now, some institutional figures are calling for the holiday not just to stay for lower value properties, but to be scrapped altogether.
Speaking the Express recently, Julian Jessop, former chief economist at the Institute of Economic Affairs, said:
“The constant tinkering with stamp duty is distorting the property market, leading to big swings both in house prices and in the number of transactions.
“Most economists agree stamp duty is a particularly damaging tax and it would be better to scrap it completely.”
Roger Bootle, meanwhile, chairman of Capital Economics, wrote a recent piece for The Telegraph in which he called for SDLT to be abolished for downsizers to give them a financial incentive to move to a smaller home, helping to alleviate the housing shortage.
On the other hand, over 40% of brokers reported in a survey that they would rather see a return to normal to see stability and slower house price inflation again.
The Treasury has not hinted that they would scrap the tax completely, although they are committed to the deadlines they have set.
That means the next time we might hear about stamp duty and any more changes will be in the autumn.
Talk to us about your moving plans, SDLT charges and refunds.