What does the stamp duty holiday mean for you?

by | Tuesday 14th Jul 2020 | Mortgage Insights

Last Wednesday (July 8th 2020) the Chancellor the Exchequer, Rishi Sunak, announced a sweeping change to the rules around Stamp Duty – or Stamp Duty Land Tax (SDLT) to give it its full title.

When the property sector was reopened in May, there were fears that the near-3 month hiatus in buying and selling together with concern over the potential recession that may follow the pandemic would cripple the housing market.

Whilst the residential housing sector is only a small contributor to the overall UK economy, it has long been seen as a barometer for economic confidence, which is one reason why the Government acted swiftly this week in raising the threshold for Stamp Duty to homes valued at £500,000 and above.

Until Wednesday, the Stamp Duty threshold had been set at £125,000 or, in the case of first-time buyers, £300,000. Under the new rules, the threshold will apply to everyone buying a home that will be their main residence. Buy-to-let and second home buyers will also benefit from concessions on Stamp Duty, although these will differ slightly.

There had been speculation that the Chancellor would announce the new measures last week, but delay implementation until his Autumn Statement, which is traditionally given in October each year.

That prompted immediate concern within the property sector that the announcement would have the opposite effect than was intended, with potential buyers holding off on any transaction until the new measures came into force.

But last week, Mr Sunak confirmed the changes would be implemented with immediate effect and would apply to all residential property transactions completed before the ‘Stamp Duty holiday’ expires in March 2021.

So, what does that mean if you’re buying a new home?

Stamp Duty Holiday For First-time Buyers

If you’re buying your first property, you will pay nothing in SDLT on the first £500,000 of the property’s value. If the property is valued at £500,000 or less, you will pay nothing in Stamp Duty, regardless of how you are financing the purchase.

The majority of first-time purchases in the UK are expected to come in under the new threshold, but you will pay 5% SDLT on the next £425,000 of the property’s value above £500,000.

Stamp Duty Holiday For Movers

If you’re moving for the second time or more, then you will also benefit from exactly the same concessions as first-time buyers.

It is among this group where the biggest savings will be seen. Prior to the new measures taking effect, if you were in this category of buyer you would have paid £15,000 in SDLT when purchasing a new home for £500,000.

As long as you complete your purchase before March 31 2021, you will now pay nothing in SDLT.

Stamp Duty Holiday For Second Homes and Buy-to-Let

Buyers of second homes and buy-to-let properties will also benefit from the changes, however will still be subject to the Stamp Duty surcharge which applied to second homes before Wednesday’s announcement.

If the property you are buying is worth up to £500,000 you’ll have to pay a 3% surcharge (a maximum of £15,000). On a property costing between £500,000 and £925,000 the surcharge will be 8% (a maximum of £74,000), between £925,000 and £1.5m it’s 13% (a maximum of £195,000) and over £1.5m the surcharge is 15%.

Can the Stamp Duty holiday be backdated?

Unfortunately, no. The measures announced last Wednesday can’t be applied retrospectively, meaning that even if your transaction completed on Wednesday morning you will still have to pay Stamp Duty at the previous rate.

It’s important to remember that completion – and not exchange of contracts – is the key here. If you exchanged contracts before the Chancellor’s announcement, but the sale wasn’t completed at that point (which is usually the case), then you will benefit from the new arrangements.

Is there any relaxation of the deadline for paying Stamp Duty?

Again, no. The current deadline for paying your SDLT to HMRC is 14 days from the date of completion – this has been the case since March 2019, when the old deadline of one month was scrapped, and this has not changed with the new Stamp Duty holiday measures announced last week.

However, it’s common that your SDLT payment will be one of the disbursements that is made by your solicitor or conveyancer at the point of completion, and you should check the conveyancing contract you signed or talk to your conveyancer so you’re clear on the arrangements for settling your SDLT payment liability.

All in all, the move to raise the Stamp Duty threshold will be good news for thousands of homeowners over the coming months, especially at a time when interest rates are also at an all-time low.

If you’re thinking about moving why not get in touch and see how our friendly team can help you take advantage of the opportunities the market currently has to offer?

Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority

Your property may be repossessed if you do not keep up repayments on your mortgage.

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