So, you might not have noticed, but the government has been announcing a lot of things over recent days. Lots of new policies around Covid-19, all designed to make us safer, improve quality of life and re-start certain industries. Just one of those announcements was around Stamp Duty – or more specifically, Stamp Duty holidays. This move, made to stimulate the property market after the standstill Covid-19 caused, has been met with both excitement and criticism. But what does it really mean?
How will the Stamp Duty Holidays Work?
In his announcement, Chancellor Rishi Sunak announced that there will be a temporary ‘holiday’ on stamp duty, with immediate effect. This holiday applies to the first £500,000 of all property sales in England and Northern Ireland, and basically means that instead of paying 5% tax on the cost of your home, you pay nothing up to the first £500,000 of your property value. If the property is worth more than that, then you will be liable for tax on the remaining amount – and you can find the breakdown of that here.
These new rates will apply until the 31st of March 2021 for buyers of their first or main residence, which was done to encourage new buyers to enter the property market. If you are buying a second house or additional dwelling (like a buy-to-let property), then you will still be liable for the 3% surcharge on top of the revised Stamp Duty rates.
What Does it Mean for Buyers?
For first-time buyers or home-movers, this is incredibly welcome news. Even if a purchase was already partway complete, Stamp Duty is not paid until the very last stage, and so any buyer of a residential home who has not yet completed can benefit from the holiday. The new rules simply state that:
‘Anyone completing on a main residence costing up to £500,000 between 8 July and 31 March 2021 will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount.’
This simple move could save new home buyers thousands of pounds and is certainly a powerful incentive for nervous first-time buyers to finally make the move onto the property ladder. Which is ultimately the idea – to kick-start the property market, which has slumped during the pandemic – and get new purchases moving again.
What Does it Mean for Landlords?
The good news is, second homeowners and buy-to-let landlords will also benefit from the increased threshold of £500,000. However, they will still have to pay a surcharge for the privilege of buying a second home – which ordinary home buyers wouldn’t have to face. Additional properties are taxed at higher rates of stamp duty – it’s basically three per cent on top of the rates applicable during the holiday.
There have been some concerns raised over the changes, however. In particular, the Labour party has described the move as being a ‘huge bung’ for landlords, and saying that it will worsen the housing crisis by reducing the supply of homes overall. But this has been refuted by a spokesperson from Ringley who stated that:
“The criticism against Rishi Sunak for introducing a stamp duty holiday with claims that it offers a “huge bung” for buy-to-let landlords is unnecessary and misplaced. It could be argued that this is the first nice thing that a Conservative government has done for buy-to-let landlords in the past decade.
Through reduced mortgage relief, higher stamp duty as well as new legislation such as the letting fees ban and right to rent checks, many landlords have effectively been squeezed out of the market in the mistaken belief they were preventing first-time buyers from getting on the property ladder by snapping up properties they would have otherwise bought. Given the number of households privately renting is set to grow over the coming years, increasing the supply of rental homes makes sense and the government should make clear whether this stamp duty holiday does apply to landlords to help drive activity and meet a growing long term housing need.”
In other words, the cuts will still help landlords, and you will still see a slightly reduced bill at the end of it. But you won’t see the £0 that a lot of new buyers will, purely because you already own a main residence. So you will still be paying that 3% (or higher depending on the purchase price) at the end of the purchase. Because of this, the property industry has already seen a huge surge in the number of landlords wanting to buy their first properties for rental, or to expand their portfolio even further.
At Northwood, we are always looking for ways to help our landlords, tenants and buyers in any way we can. We have already been in touch with many people who were in the process of buying homes, either for themselves or for rental, and updating them on the situation. But as with anything in this pandemic, things can change very quickly, so it’s important to keep up to date with any new announcements. Which is what you’ve got us for! If you have any questions about the changes to stamp duty, or you want to look into buying your first home, just get in touch with the team at Northwood today.
