Budget: Sunak announces stamp duty nil rate extension in March
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The Stamp Duty holiday was introduced last year due to COVID-19. The holiday meant people did not pay any Stamp Duty Land Tax (SDLT) on property purchases up to £500,000 in England and Northern Ireland. However, from today (July 1) major changes have been introduced to the discount offered under the holiday.
How has the Stamp Duty holiday changed?
The Stamp Duty holiday has not finished yet, but the tax-free threshold has now undergone a major change.
The Chancellor previously faced pressure to avoid a “cliff-edge” which could see some home buyers miss out on any Stamp Duty discount at all when the holiday ended.
So in response, a tapered approach was announced which means the discount will phase out over the course of this year.
From July 1, the tax-free threshold for Stamp Duty has dropped from £500,000 to £250,000.
The reduction means that home buyers will only pay Stamp Duty on the price of a property above £250,000.
Homebuyers will still benefit compared to the normal Stamp Duty rates for the next few months, but the scheme will eventually come to an end in October.
From October, the Stamp Duty Land Tax threshold will revert to £125,000.
How much Stamp Duty do first-time buyers pay?
First-time buyers are still eligible for a discount on Stamp Duty, even after the Stamp Duty holiday ends.
From July, first-time buyers do not pay any Stamp Duty on property purchases up to £300,000.
Where the purchase price is over £300,000 but does not exceed £500,000, first-time buyers will pay five percent on the amount above £300,000.
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Will house prices go down this year?
In the last few months, house prices have rocketed due to several factors, the Stamp Duty holiday being one of them.
Many have speculated on how house prices will be affected when the Stamp Duty holiday starts to taper off.
One property expert thinks the market could start to “stabilise” once the Stamp Duty holiday ends in October.
Pamela Chan, a property lawyer at North West law firm Jackson Lees, told Express.co.uk: “As the Stamp Duty Holiday begins to draw to a close, the market is extremely busy, as expected. Prices are continuing to rise and it is a seller’s market.
“Understandably, there’s been a lot of concern among buyers in recent months who are eager to complete on their purchases as soon as possible and therefore benefit from the Stamp Duty Holiday.
“It’s likely that this trend will continue throughout the summer as the Stamp Duty Holiday tapers off – buyers will be keen to secure a discount or relief on the Stamp Duty in any way they can before October when it ends. Once it does end though, we expect to see the market stabilise.”
House prices could continue to rise later this year, but perhaps at a less aggressive rate than has been seen in recent months.
Cormac Henderson, CEO of national home buying service Spring, told Express.co.uk: “Finally, there is still ongoing pent up demand from as far back as the Brexit vote in 2016, to the election and now the pandemic.
“People have been sitting on the fence for some time and in many ways, the pandemic has evoked a carpe diem approach to home moving. For many people, the time has come to make that move they have always thought about.
“Spring anticipates a gradual rebalancing of supply and demand as more properties are listed for sale and buyer activity is tempered by rising unemployment.
“The rise in unemployment is expected to be gradual thanks to the flexible furlough scheme, which appears to have successfully avoided a wave of layoffs.
“Following a period of double-digit growth, Spring’s analysts are predicting a five to six percent annual plateau towards the end of 2021 with a three to four percent resumption of normal property price inflation by 2022.”
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