On Wednesday, Chancellor Rishi Sunak announced a stamp duty holiday with immediate effect which means home buyers will pay no tax on properties up to the value of £500,000.
The measure will remain in place until March 2021 and could save buyers up to £30,000 when they purchase a home, making this a good time to benefit from investment in the UK property market. Stamp Duty Land Tax (SDLT) is a tax that is levied on single properties.
Until now, if your first home purchase cost more than £125,000, you would have had to pay SDLT, and for a second or additional home, pay stamp duty on any amount above £40,000.
There are several rate bands which include: 0pc on the first £125,000; 2pc on £250,001-£925,00; 5pc-10pc on £925,000-£1.5m; and 12pc on any value above £1.5m.
However, the stamp duty holiday will mean buyers will no longer have to pay any duty on homes up to £500,00, regardless of whether they are purchasing their first home, moving from one property to another or buying an additional property. Under the new rules, someone buying a house for £500,000 stands to save the princely sum of £15,000 in stamp duty.
At the same time, cheaper homes will yield savings worth having. A £150,000 home would render a saving of £500, while a £350,000 house would save £7,500 (£2,500 for first-time buyers). As such, the change in the rules stands to liberate millions of pounds for home buyers all across the country.
Tax holiday should energise housing market
The stamp duty holiday has been estimated to free up the property market for first-time buyers paying more than £300,000, as well as home movers and second home buyers. The latter category will still have to pay the second home surcharge (starting at 3pc of the purchase price), but will nevertheless make substantial savings from the duty holiday.
As the coronavirus resulted in the world closing down in mid-March, the UK property market, one of many industries brought to a shuddering halt, entered a deep freeze throughout March, April and early May.
Although the Government announced plans to get the market moving again in mid-May to rouse it from its frozen state, the public has been reluctant to return to the market, due in part to the virus still being in circulation and the financial impact felt by many arising from the consequences of Covid-19.
With enquiries increasing, demand evidently exists but, until now, buyers have needed a confidence boost to return to their buying behaviour prior to the onset of the coronavirus. Therefore, the stamp duty holiday should enable individuals to save thousands as they are handed the keys to their new home.
Stamp duty holiday could stabilise house prices
Mr Sunak has stated that the holiday will last until March 31, 2021, which means that the period between now and then could be a very busy one for the property market. Furthermore, there’s every chance that the Government could extend the stamp duty holiday, although much will depend on the short-term effect it has on the market.
As the country emerges from the lockdown and contemplates the new normality, demand for homes has increased over the last six weeks, but it will likely take more than pent-up demand to see the property market once again working to full effect.
While the average UK house price currently stands at £232,000, the majority of people buying homes will benefit from the duty holiday. And it’s expected that the holiday will increase transactions in the housing market in the short term, which could lead to higher house prices over time as demand for homes increases.
Naveen Jaspal, Emoov COO, speaking about the changes to stamp duty, said that the stamp duty holiday is a great asset to all buyers, because they can now add their stamp duty savings to their deposit and take advantage of more flexibility in property prices. He expects, he added, to see house prices stabilise and rise during this stamp duty holiday.