Stamp Duty Holiday: How does it work for you?

The Government’s Stamp Duty Land Tax (SDLT) holiday runs until 31st March 2021, and removes the standard rate of SDLT for transactions under £500,000 in England. Transactions over this amount will have to pay SDLT on the additional sum.

It has been implemented to kick-start the property market after COVID-19 put a halt to the majority of transactions. But what are the implications of the stamp duty holiday for ‘typical’ buyers?

Landlords or companies

Purchases of second homes or company purchases still attract a surcharge of 3% of the purchase price, but no longer the standard rate of SDLT which was also payable.

For example, an investor buyer purchasing a property for £250,000 will now pay £7,500 SDLT (3%); previously they would have had a liability of £10,000. This saving will likely encourage landlords and companies to take advantage of the relief and develop their portfolios, especially as many sellers will see an investor or company as a more attractive buyer – they are unlikely to be part of a chain and more likely to have the funds without needing a mortgage.

stamp duty

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First time buyers stamp duty

First-time buyers have benefited from not being required to pay stamp duty for purchases of their home for up to £300,000 to try and help them on to the property ladder.

The SDLT holiday means that many more now benefit from this relief – potentially pricing these first-time buyers out of the market. Some buyers now feel they have more money to spend on the property as they do not have to set aside budget to pay SDLT. Some lenders have also increased the amount of deposit needed to 15%.

In addition, Help to Buy ISAs are being phased out – but Help to Buy equity loans are only filling this gap for new build properties. Thus, the dream of owning a home may be slipping further away – or at least being pushed back to April 2021.

People already on the property ladder

People already on the ladder are likely to benefit far more than first-time buyers because they otherwise would have had to pay SDLT. Assuming someone was replacing their main residence and buying for £499,000 – previously they would have paid £14,950 in SDLT but now this will be zero.

This may mean many are more willing to move. If these people are upsizing, it may open in the market more smaller homes which typically appeal to first time buyers. Potentially, if they can find the funds and beat off the investor purchaser, there may be a chance for first time buyers to get on to the ladder.

Overall, the stamp duty holiday will inevitably result in movement in the housing market, but who will benefit the most remains to be seen.

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