House-buyers may well have been delighted to have heard the Chancellor Rishi Sunak cut Stamp Duty until March 31, 2021 this week. In a bid to boost the UK economy amid the ongoing coronavirus crisis, reduced SDLT rates apply for residential properties purchased from July 8, 2020.
The threshold has this week been raised, meaning until March 31, purchasers only start to pay the tax on any amount paid for the property that’s above £500,000.
The rates apply regardless of whether it’s a first-time buyer or someone who has owned property previously.
Currently, up to £500,000 on residential properties, the SDLT rate is zero percent.
The next £425,000 – meaning the portion from £500,001 to £925,000 – has a Stamp Duty rate of five percent.
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On any portion from £925,001 to £1.5million, the SDLT rate is 10 percent.
Then, on any remaining amount above £1.5million, the rate that applies is 12 percent.
However, for additional properties, an additional three percent higher rate still applies.
It’s possible to use a Stamp Duty Land Tax calculator online to work out how much tax would need to be paid on a purchase.
The Money Advice Service is among the websites hosting these tools, as well as GOV.UK.
While many welcomed the move to cut SDLT temporarily, a warning has been issued regarding one aspect of the decision – with a property expert suggesting it was “high risk”.
Commenting on the news, David Westgate, Group Chief Executive, Andrews Property Group, said: “The Chancellor’s Stamp Duty holiday is high risk but a welcome short-term stimulus.
“While it puts more money into pockets today, it could actually see prices rise as demand increases.
“Making the much anticipated Stamp Duty cut temporary is a gamble if the economy hasn’t recovered by the Spring.
“It is possible that we will have a boom scenario between now and April next year when a disproportionate number of people are buying at higher prices followed by softer prices when the scheme ends and asking prices are adjusted.
“Arguably the real winners will be purchasers of higher value properties who have just had £15,000 knocked off their completion bill, not the people it was intended for.
“Cliff edge deadlines completely distort the market and rarely benefit the consumer.”
Meanwhile, Andrew Montlake, Managing Director of the independent mortgage broker, Coreco, said: “With the changes to Stamp Duty announced Wednesday, the Chancellor has provided another welcome boost to the property market and reiterated exactly how important bricks and mortar is to the health of the economy and broader consumer sentiment.
“It is a relief that the Stamp Duty changes come into effect immediately, although we are concerned that the March 31 deadline may be premature.
“If the economy hasn’t stabilised by April as planned, house prices could come under extra pressure when the Stamp Duty holiday comes to an end.
“Holiday periods tend to result in an artificial time of higher demand, driving up prices and therefore reducing the real impact of the changes.
“For now at least, it is good news for many prospective buyers around the country and will go some way to offset the reduction in the number of mortgage products available at 90 percent Loan-to-Value, giving buyers a little more cash for a deposit. It may also act to give lenders more confidence to make available more higher loan-to-value products.
“There is also the question over whether Stamp Duty changes alone will really solve housing market woes at a time when many borrowers are faced with difficulties obtaining mortgages due to job insecurity, are deemed “mortgage prisoners”, or are faced with issues around cladding.”