In 2017, Stamp Duty Land Tax was considered to be contributing to the maladjusted property market in the UK, particularly in London and the South East. It was quoted as being an “impediment to social mobility”. Therefore, the introduction of the Stamp Duty Land Tax holiday in June last year set a much needed spark to the property market – both for buyers and sellers.
Investors rushed to take advantage of the tax benefits and property owners made the most of the demand by boosting prices. Earlier this year, Zoopla had stated , “Given that stamp duty land tax is traditionally a southern tax, it’s likely that buyers in London and the South East will benefit most from the extension.” By the soar in property sales in that area, including properties to rent in Buckingham, this is probably true. However, the benefits are not limited to one area but to the whole of England and Northern Ireland. Scotland and Wales reverted to their standard Land/Buildings Transaction Tax w.e.f July 2021.
Advantages: The SDLT holiday is in the final stage of the phasing out programme. From now till the end of September 2021, buyers can still benefit as follows:
- There will be no stamp duty on properties up to GBP 250,000.
- 5% will be payable on properties from GBP 250,001 to GBP 925,000.
- 10% will be payable on properties from GBP 925,001 to GB 1500,000
- 12% will be payable on properties above GBP 1500,000.
From 1 October 2021, rates are scheduled to return to normal with no stamp duty payable on properties upto GBP 125,000.
Beating the deadline: Even though it is more than 2 months for the SDLT holiday to end, there has been a rush to take advantage of the benefits. Applications for properties have been pouring in. This has resulted in officials and conveyancers having a difficult time coping with the volume. So, if you are looking to still take advantage of the holiday, you need to quicken your steps and go ahead at the earliest, to meet the deadline.
First time buyers: The reduced stamp duty will not have an impact on first time buyers. From July 1, 2021, first time buyers will not pay SDLT for property under GBP 300,000. 5% SDLT will be payable for property valued between GBP 300,000 and GBP 500,000. There will be no relief for property over GBP 500,000 and the standard rates will apply.
Second home owners: Buying an additional property will be liable for a surcharge of 3% over and above the SDLT holiday tax brackets. If the property being bought is replacing the main residence which has been sold, the 3% surcharge does not apply. If the main property is still pending sale when the replacement is bought, the surcharge will have to be paid, but a refund can be applied if the original home is sold within 3 years. However, especially for companies or more expensive properties, the saving on the standard SDLT is still beneficial. Landlords and companies are usually more attractive to a seller as they are likely to have the necessary funds and are probably not part of a chain.
Upsizing accommodation: The pandemic with its lockdowns and working from home has made comfortable accommodation a priority in many families. More spacious accommodation, with an office cubbyhole, and outdoor space for relaxation have now become a necessity. This has resulted in movement to larger accommodation in the suburbs becoming more popular.
Hence, their smaller homes left behind become available in the market – the type that first time buyers usually appreciate. So the public – those looking at upsizing their accommodation and first time buyers looking for smaller accommodation – can both benefit.
Overseas investment: The SDLT holiday applies to overseas investors also, even though a 2% SDLT surcharge has been applicable from 1st April 2021. However, the UK property market has always attracted foreign investors and since it is usually the city properties that are popular, advantages of the reduced Stamp Duty will still be beneficial to the overseas investor.
Attractive mortgages: Together with the SDLT holiday, the Government introduced the 95% mortgage scheme. By paying just a 5% deposit, it has been a great help for first time buyers and home owners to secure the required mortgage. This has led to other lenders offering competitive mortgage schemes as well.
Conclusion: The surge in business in the real estate market has been overwhelming. Some agents feel that the increase in house prices will not drop at the end of the stamp duty scheme on 30 September 2021. They feel that many factors like demand exceeding supply, movement to a larger accommodation, low mortgage rates and unexpected savings during the lockdowns will still keep the flag flying high over the property market.
However, it cannot be denied that the SDLT holiday definitely caused a boom in the UK property market at the right time. And, though time is limited, benefits are still available by utilizing the opportunities that the reduced Stamp Duty scheme offers.