Stamp duty holiday - everything you need to know

The government have recently removed Stamp Duty on dwelling purchases up to £500,000 (not including the additional 3% rate if that applies) until 31st March 2021. Private Finance has seen a huge rise in enquiries following the announcement as buyers look to benefit from the savings and either simply move to a new house or purchase the second home or investment property they had been considering.

It's estimated that 90% of individuals buying new homes between now and when the holiday ends will not pay any stamp duty on their purchase. Those who are buying over this value still stand to benefit from a saving of £15,000 – enough to undertake refurbishments or buy some new furnishings.

Below you will find an example of some of the potential savings for average residential purchases, as well as answers to some of the potential questions you may have:

   Amount  Stamp duty before  Stamp duty now  Saving
 Average downsizer  £320,000   £5,750  £0  £5,750 
 Average first-time buyer  £220,000  £0  £0  £0
 Average UK house price  £231,000  £2,120  £0  £2,120
 Average London house  price  £540,000  £17,000  £2,000  £15,00

What about the additional 3% rate?
The 3% top-up for purchases of ‘additional’ dwellings (e.g., second homes and buy-to-lets) and for purchases of dwellings by companies is not affected by this announcement. Therefore, these buyers will only have to pay 3% tax on the first £500,000, still a sizeable saving.

First-time buyer relief
This has now been suspended under these measures, but this Stamp Duty Holiday ultimately makes it redundant regardless.

Does this apply evenly across the UK?
Unfortunately, for those looking for a home in Wales or Scotland they will not benefit from this cut as it only applies to England and Northern Ireland. The Stamp Duty (LBTT in Scotland) holiday in Wales and Scotland is on purchases up to £250,000 and other restrictions apply.

Do I have to pay SDLT moving buy-to-let properties into a Limited company?
No, the holiday still applies, although you will have to pay the additional 3% and any Capital Gains Tax. However, despite this, it presents a significant saving both in the short term and, in the long-term landlord’s benefit from further savings having their portfolio under a Limited company structure.

How is Multiple Dwellings Relief affected?
Multiple Dwellings Relief allows the SDLT on the purchase of two or more dwellings to be computed by reference to the average value of the properties purchased, multiplied by the number of dwellings, instead of referring to total purchase price of all the dwellings. This already presented significant savings, but with the Stamp Duty Holiday purchasers of this type of property stand to save at least twice!

The long-term view:
Evidence from previous Stamp Duty holidays shows that it is unlikely to increase total sales volumes, but rather brings forward the completion date, and the end of past holidays has always created a fall in the number of sales. The 8-month length of this holiday is indicative of just how much the housing market required a boost in the wake of Coronavirus, although it may need to be extended unless we see a “V” shaped economic recovery. Ultimately the government are likely to reform Stamp Duty in the long term and with the economic uncertainty created Coronavirus, there is talk of some big changes to how property is taxed, including removing SDLT altogether and putting a Capital Gains Tax on all purchases or even introducing a Land Tax on properties… something before now we could never have imagined being introduced by a Conservative government, but these are strange times!

Please do get in touch with our Alderley Edge branch on 01625 540340 or our Hale branch on 0161 928 8881.

Please be aware that the information contained in this article should be considered as a guide only and should not be considered financial and/or tax advice - for advice in this regard please consult a regulated advisor.