Published: 13/07/2021 By Musgrove & Co
Stamp duty holiday changes
Stamp duty rates in Northern Ireland and the UK changed from 1st July. This is as the tax holiday, introduced in June 2020, is beginning to phase out. This means home buyers will have to pay stamp duty again for purchases over £250,000.
As of June 2020, buyers have not had to pay any stamp duty on the first £500,000 of their purchase price. However, from 1st July, stamp duty will exceed £250,000 at the following rates:
£0 to £250,000 at 0%
£250,000 to £925,000 at 5%
£925,001 to £1,500,000 at 10%
£1,500,000+ at 12%
Rates will normalise from 1st October 2021.
£0 to £125,000 at 0%
£125,001 to £250,000 at 2%
£250,000 to £925,000 at 5%
£925,000 to £1,500,000 at 10%
£1,500,000+ at 12%
Why was the stamp duty holiday introduced?
The stamp duty holiday was introduced in July 2020, and it was designed to lift the property market by helping buyers whose finances were hit by Covid-19. This meant savings of up to £15,000 for home buyers.
Landlords and second home buyers were also able to access the tax deduction. However, they still had to pay an additional 3% of the stamp duty levied under the previous rules.
Did the stamp duty holiday increase the prices of the houses?
The stamp duty holiday certainly encouraged the housing market.
According to the Nationwide Building Society, UK house prices rose 13.4% in the year to June, the fastest pace since November 2004.
Estate agents stated an outpouring of interest in March as buyers and sellers rushed to complete property deals before the plan was due to end. Then the holiday was extended till the end of June.
However, there are many other reasons why home prices are rising.
Help for first-time buyers
First-time buyers will not pay any stamp duty on property purchases up to £300,000 from July.
High street lenders are also starting to pledge mortgages to pledgers with deposits of only 5%, under a new government guarantee scheme.
The scheme is designed to help first-time buyers secure a home.
The new plan can be availed by anyone buying a home costing up to £600,000, unless it is a buy-to-let property, a second home, or, in some cases, a new construction.
According to the latest HM Revenue and Customs (HMRC) figures, the government's annual take from stamp duty is around £12bn. This roughly equates to the 2% tax that the Treasury collects.
What about Scotland and Wales?
There were similar tax deductions for homebuyers in Scotland and Wales.
In Scotland, the current rates for land and building transaction tax are:
£0 to £145,000 at 0%
£145,001 to £250,000 at 2%
£250,000 to £325,000 at 5%
£325,001-£750,000 at 10%
Scottish landlords pay an additional 4% land and building transaction tax on top of standard rates.
In July 2020, the Welsh government raised its land transaction tax (LTT) limit to £250,000 for people buying their main home. It later extended the holiday to 30th June, in line with Northern Ireland and the UK.
The general rates of land transaction tax applicable after 1st July are:
£0 to £180,000 at 0%
£180,001 to £250,000 on 3.5%
£250,000 to £400,000. at 5%
£400,001 to £750,000 at 7.5%
£750,001 to £1.5m at 10%
Above £1.5m at 12%
Local mortgage advice.
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