Stamp Duty Holiday Autumn 2020
The Chancellor of the Exchequer has reportedly said there may be a Stamp Duty holiday Autumn 2020. This is apparently to be announced in the upcoming Autumn budget statement. This could mean that the threshold is risen from £125,000 before paying stamp duty up to £500,000. See “Property Tax for Beginners” for a full breakdown of current thresholds.
This news comes as a part of the government’s plan to help with reviving the economy after the effects of COVID-19. The holiday could last for approximately six months to encourage short term spending on new houses.
So what does this apply to?
Please note, no formal announcement has been made yet so details are sketchy.
Well, there are essentially 3 different rules for applying stamp duty at varying rates (soon to be 4 if you consider non-uk residents, see “Foreign Investors Act Before April 2021” for more details on the 4th. It is not clear at the moment how this will be applied though.
First Time Buyers:
As is stands at the moment, first time buyers pay 0% stamp duty on any property up to the value of £300,000. (See government website for full details). This new announcement of a stamp duty holiday could see this extended to £500,000. It is unclear at the moment though whether or not this change will just effect first time buyers or anyone else too.
Editors note: It has now been clarified that the stamp duty holiday will be applicable to first time buyers effective immediately until 31 March 2021.
As it relates to your main residence (and it isn’t your first time buying a house). You are currently required to pay incremental rates based on the value of the property you are purchasing. (A full breakdown of this can be found on the government website.) The first increment currently starts at £125,000, in which case you pay 2% on anything between £125,000 and £250,000. After that, it’s 5% for the next £675,000 you spend. The Autumn budget announcement could see the tax free band shift from £125,000 right the way up to £500,000.
Editors note: It has now been clarified that the stamp duty holiday will be applicable to residential buyers effective immediately until 31 March 2021.
More Than One Property / Businesses
Finally, as it stands at the moment you pay additional tax rates on when you purchase a property through a company or already own one in your name. The breakdown of these tax banding can be found on my “Property Tax for Beginners” post.
My personal opinion is that relief on this tax is going to be unlikely. I imagine it will just apply to First Time Buyers and if lucky, residential buyers too. That being said, stranger things have happened – perhaps we could see a break on this set of increments too?
Editors note: Well, my opinion was wrong! It is applicable to people who already own a property. However, the 3% surcharge is still applicable on the purchase. This is effective immediately until 31 March 2021.
So what does this mean?
I hate to say it, but in the short-term before the Autumn budget announcements, I think we are going to see the housing market take a sharp decline. Why would you complete on a house purchase now when if you sat and waited for a few months you could potentially make a significant saving for thousands of pounds?
Personal opinion here, I think it’s a big shame that this news has got out. All this has done in the short term, when the economy needs it the most – is create uncertainty. What looked like a relatively healthy property market (all things considered) is suddenly likely to stall again.
If you’re thinking about buying a property, wait for some more clarity from the government so you don’t put yourself out of pocket by thousands of pounds.
What I’d like to see?
One word – clarification.
Oh, what would also be nice is if there will be a stamp duty holiday announcement in the Autumn. That this is backdated to July. That way, at least the housing market won’t stall in the meantime.
Editors note: I’m glad to say we saw this clarification. We now know how it is applied and when… Immediately until 31 March 2021!