Stamp Duty Land Tax – The new temporary reduced rates explained

With immediate effect the new Stamp Duty Land Tax (SDLT) threshold of £500,000 will apply and will run until 31 March 2021. This means any buyer purchasing a primary residential property between 8 July 2020 and 31 March 2021, up to the value of £500,000, will be exempt of paying Stamp Duty.

According to the release by the Government the exemption will apply to all primary residential property purchases, so regardless of whether the purchaser is a first-time buyer or someone who has owned a property before.

This means that on purchases over the £500,000 threshold, buyers will pay a 5% SDLT on the portion from £500,001 to £925,000, 10% on the portion from £925,001 to £1.5 million and 12% on any portion over £1.5 million.

Visit gov.uk for more information

When it comes to purchasing a second home, the Government has introduced higher additional rates with a 3% higher rate on top of the new revised standards. For people purchasing a holiday home up to the threshold value of £500,000 they will pay 3% SDLT.  Those buying a second home over the threshold with pay 8% on the portion from £500,001 to £925,000, 13% on the portion from £925,001 to £1.5 million, and 15% on the remaining portion over £1.5 million.

Visit gov.uk for more information

At Joplings we have experienced an increase of valuations and new instructions with clients looking to take advantage of the savings that can be made by the reduction in Stamp Duty Land Tax.  Many buyers will not pay any  stamp duty when purchasing a property up to £500,000. This money could be used to purchase a new kitchen or bathroom suites for their new home.

To take advantage of this we believe you need to place your property on the market as soon as possible, ideally before the end of September to give yourself the best chance of selling before the 31st March 2021.

For a free valuation to see how much your property is worth contact us at our Thirsk or Ripon office.

Call us on 01845 522680 or 01765 694800 for further advice and information.

Can Boris change the Stamp Duty?

Guild Blog: Could Prime Minister, Boris make changes to Stamp Duty in the near future?

Many in the property industry have called out for the new Prime Minister, Boris Johnson, to act decisively on his previously proposed plan of possibly scrapping Stamp Duty on homes under £500,000, at the same time cutting it from 12% to 7% on properties valued at over £1.5m. The hope is the proposed changes would mitigate the potential negative impact of the recent political instability and would improve buyer confidence in the market.

In the past, Prime Minister Boris Johnson had said that he would potentially call for an emergency Budget meeting in September where he would implement changes to current Stamp Duty legislation and drastically raise the threshold to the aforementioned £500,000. Excessive Stamp Duty charges have long been a challenge for those on all levels of the housing ladder, so both buyers and sellers will now be eagerly awaiting confirmation on how he intends to address this.

Free up over 300,000 buyers from Stamp Duty

Should the proposed changes be made it would essentially free up over 300,000 property buyers from having to pay Stamp Duty, based on figures from 2018/2019. The number could even increase as sellers just over the threshold drop their price to entice interest. When you consider the homes sold that are already exempt, over 650,000 transactions from last year would not have had to pay the tax.

The change could mean that entire regions where the average price of property is below £500,000 would be lifted from paying Stamp Duty. This would boost transactions in these pockets of the market and assist with economic growth in these areas.

Possible switch from buyer to seller

Johnson had also said that he may switch the responsibility of paying the tax from buyers to sellers – a drastic move that would greatly benefit potential buyers. Taking Stamp Duty off the table for prospective buyers would be a huge advantage, particularly for those who are looking to upgrade to a larger home to meet their growing family needs.  However, the change would bring about a few issues. For example, someone who is currently selling their home would have paid Stamp Duty on it when they purchased it. With the proposed change, they would then have to pay it again when they sold. Essentially, this would equate to double taxation. Sellers may also push up their asking price in a bid to cover the additional Stamp Duty charge they would incur.

There is also the question of retirees who are selling to downsize. Selling a large home would mean paying higher levels of Stamp Duty, which would be a blow for someone planning for their golden years.

More buying power for first-time buyers

As it stands, buyers purchasing a home under £300,000 are exempt from paying Stamp Duty. The proposed increase in the threshold would give them the option to purchase a higher-priced home, while still being exempt. This is provided of course, they can afford a home over £300,000 and have the money for the deposit and other costs involved in purchasing a property. A study from the Royal Institution of Chartered Surveyors found that there had been no significant positive impact on property sales after the change in Stamp Duty in November 2018, so perhaps it is unlikely that any further change would bring more first-time buyers to the market.  That said, the number of first-time buyers continues to increase, which can be attributed to other aspects such as Help to Buy.

Get the market moving

The idea behind the proposed policies is to the get market moving in sectors below £500,000, as well as those at the top end. The hike in Stamp Duty for homes over £925,000 in November 2014, greatly effected the top tier of the market slowing it to a near standstill. Ever since, transactions in the upper end of the market have suffered. The proposed cut from 12% to 7% would do much to invigorate this end of the sector, even if only for a time.

Iain McKenzie, CEO of The Guild of Property Professionals, said he would welcome any positive move by the new Prime Minister on Stamp Duty and taxes on landlords. I am in favour of anyone who is going to improve sentiment or confidence in the housing market. Current economic data is strong, but the uncertainty of Brexit has caused stagnation in the market. Mr Johnson’s commitment to ‘deliver Brexit’ on 31st October with a new ‘can do’ spirit is therefore very much welcomed.”

While the changes are merely talk at the moment, should they come about, it will be intriguing to see what impact they will have on the market moving forward. For more information about the current Stamp Duty thresholds read our blog on the subject.

Guild Blog: How Stamp Duty Changes will Impact the Market?

In his third Budget as chancellor, Phillip Hammond announced that he will extend the cancellation of stamp duty for first-time homebuyers on properties up to £300,000 to first-time buyers of shared ownership properties valued up to £500,000.  He also stated that the measure would be retrospective so that any first-buyer who has bought a home since the last Budget will benefit.

 

The government has done much to enable first-time buyers the opportunity to get into the market and removing stamp duty on all shared equity purchases up to £500,000 is another great initiative for those purchasing their first home. Since the abolishment of the stamp duty for first-time buyers, many more people have been able to get their foot on the property ladder despite the soaring average deposit amount required. In fact, during the first half of 2018, the number of first-time buyers hit a 12-year high at 175,500.

How will stamp duty changes affect the market in 2019?

“Our view is that the first-time buyer market will be one of the larger buyer groups in 2019,” says Michael Delaney, Director at Lane & Bennetts, “and provided they are well funded for deposits through savings or the ‘Bank of Mum and Dad’, the changes will end up being a kick starter for the sub £300,000 sales market currently being vacated by the buy to let landlords who have been inhibited by the tougher tax regimes.”

Other than focusing on stamp duty, could more be done?

While some believe the changes will continue to boost the numbers of first-time buyers in the market, others believe that more could be done, and certain factors could nullify the impact. Patrick Stappleton, Managing Director of Redwell Estates Ltd, says that anything to help first-time buyers get into the market is a good thing, but like all schemes, they aren’t going far enough. “They should be focussing on getting single occupancy of larger properties moving to release more housing into the mainstream and allow more people to move up the housing chain,” he adds.

 

Brexit remains a factor

Jack Reid, Managing Director of Orlando Reid, says: “There will be an increasing number of motivated buyers out there looking for their first home. It will have a bigger effect on the market outside of London as the stamp duty exception is up to £300,000. It won’t benefit London if a buyer were to purchase a whole property as opposed to shared ownership because of the higher prices compared to the rest of the UK. However, it will increase the number of shared ownership purchases for first-time buyers in the capital. I personally don’t feel it will have a huge positive impact on the market as right now the bigger problem is the uncertainty caused by Brexit and the lack of a deal with the EU.”

Director of Hunter French, Jacob Heatley-Adams, says: “Although the change could have a positive boost on the housing market which would, in turn, feed up through the market to create fluidity, the effect that Brexit is having has nullified any positivity that this decision would have created. It seems that first time buyers are sitting on their hands waiting to see what the outcome of Brexit is. Let’s face it, if you were a first-time buyer and had heard Mike Carney spouting that house prices could drop by a third if a no deal Brexit happened then you would no doubt be waiting to see what happened.”

 

What about stamp duty charges in the second-hand market?

While the much focus has been placed on first-time buyers, not much has been done to boost other sectors of the market. According to Heatley-Adams, there has been a rapid slowdown in the market over the last couple of months despite having plenty of sellers wanting to move, it seems that they cannot move as the market is not flowing.

Sue Dyer, Partner at Atwell Martin, says that the main problem many agents are coming across is the 3% stamp duty on second homes. “The current stamp duty on second homes has prevented a lot of potential purchasers from buying holiday homes or a pad for Monday to Friday working or parents looking to invest in property for children entering University. Should this be lifted then the marketplace would become a lot freer flowing again.”

Jared Thomas, Director of Emsleys Estate Agents Ltd, agrees. “I don’t believe the change in stamp duty for first-time buyers will have much of a positive impact on the market. In all honesty, they need to remove the second property stamp duty charge to have any positive impact whatsoever,” says Thomas.

 

Jobs and deposit requirements still a factor

According to David Corben of Corbens in Swanage, the south coast market has seen no effect whatsoever with the changes in stamp duty. “We are primarily a holiday and retirement town which, because of the lack of jobs in the area means that most young first-time buyers have to move out to Poole or Bournemouth to secure a job.  For those who stay, unless they are fortunate to be blessed with the ‘Bank of Mum and Dad’ most will be unable to afford to save for the initial deposit to buy their first home so will end up renting, and it is the rental market which has been hit more by the changes with the two-tier stamp duty levy.  What we have seen over the last two years is buy-to-let investors have been put off purchasing because of the increase in the second home duty,” he adds.

 

While the full impact of the stamp duty changes remains to be seen, it seems the general sentiment among agents is that more still needs to be done to encourage transactional volumes and price growth in all sectors.

To find out the stamp duty payable on your home purchase use our stamp duty calculator.

Guild Blog: First Time Buyers Benefit from Stamp Duty Tax Relief

First Time Buyer Stamp Duty Benefits
First Time Buyers Benefit from Stamp Duty Tax Relief

 

Yesterday marked a year that first-time buyers have benefited from the stamp duty tax relief.

The money-saving tax relief, which is known as First Time Buyer Relief (FTBR), was introduced on 22 November 2017.  The Treasury announced that since the inception of the scheme, more than 180,500 first-time buyers have benefited, saving a total of £426 million pounds.

 

Iain McKenzie, CEO of The Guild of Property Professionals, said: “The government’s effort to assist first-time buyers to get into the market is seeing fruit with the number of first-time buyers at a 12-year high and climbing. Provided they have access to finances to meet deposit requirements, either through savings or their parents, first-time buyers will have an even greater impact in the market during 2019.”

The scheme is available to any first-time buyer purchasing a property in England or Northern Ireland with a purchase price of no more than £500,000, in the budget last month the relief was extended to first-time buyers purchasing a property through an approved shared ownership scheme. According to the Treasury, the relief was claimed in over 58,800 transactions between July and September this year, an increase of 12% compared with the previous quarter.

“While factors such as Brexit are still having a major impact on the housing market, the stamp duty relief will continue to increase the number of motivated buyers looking to purchase their first property,” adds McKenzie.

Find out what stamp duty you will pay on your property purchase by using our stamp duty calculator.