Stamp duty holiday ends tomorrow after a year of frenetic activity
The stamp duty holiday that began in July 2020 ends this month, with the old rates coming into play from October 1. It had a huge impact, but what will happen now?
In an effort to shake up the housing market, the government took drastic measures last year. Between July 8, 2020 and June 30 of this year, the government raised the zero-rate range for the tax to £ 500,000. This meant that houses with a lower value were not eligible for stamp duty. Properties costing more than this amount were only eligible for stamp duty on the additional cost.
Between July 1 and September 30, the government lowered the zero rate bracket to £ 250,000. This still meant big savings for thousands of home buyers. Even buyers of second homes could benefit from the reduction, even if they had to pay the pre-existing surcharge.
From October 1, rates return to normal. This means that the zero tax bracket will come down to £ 125,000. The full breakdown of stamp duties on first dwellings is as follows:
|Property or rental premium or transfer value||SDLT rate|
|Up to £ 125,000||Zero|
|The next £ 125,000 (the portion of £ 125,001 to £ 250,000)||2%|
|The next £ 675,000 (the portion from £ 250,001 to £ 925,000)||5%|
|The next £ 575,000 (the portion of £ 925,001 to £ 1.5million)||ten%|
|The remaining amount (the part greater than £ 1.5million)||12%|
Beehive of activity in the housing sector
The initiative has undoubtedly proved to be extremely successful for the country’s real estate market. Initially, the incentive was scheduled to end in March 2021. This sparked a huge surge in activity leading up to Christmas as people rushed to close deals to take full advantage of the tax break.
The extension meant that appetite in the sector was maintained. This can be seen through the Treasury’s recent announcement of its stamp duty revenue in the first eight months of this year.
Between January and September, the country’s stamp duty bill stood at £ 7.6 billion. That’s £ 200million more than the same time last year, despite the fact that the tax cut would have removed the cost of many purchases. It demonstrates the real strength of appetite in the sector, with trading levels reaching historic highs.
Jonathan Stinton, Head of Intermediate Relations at Coventry Building Society, comments: “The stamp duty has continued to be a very lucrative source of revenue for the IRS, even with a large portion of real estate purchases being exempt for more than a year. year.
“Obviously, there is still a very healthy market for higher value homes, second homes and rental properties. “
Could the government change the long term stamp duty?
Stinton is one of the many commentators who believe it is possible to change the property tax. He suggests the government could raise stamp duty thresholds to stimulate the market. As average home prices continue to rise, higher tax bills could deter buyers.
He adds: ‘When the holidays end in a few days, the property tax bills for the average home buyer in England will be more than double than in 2014, when rates were last revised.
Former government minister Lord Willetts is another advocate for change. He thinks that a reform could free up more housing, while helping the youngest.
“The cost of housing is holding back the younger generation,” says Lord Willetts. “We need to bring more housing to the market for them. A proportional property tax is the key to this.
“It would replace the housing tax which has become more and more regressive and particularly harsh for young people.
How the government will take stock of the housing situation may become clear on October 27. This is the date set for the fall budget and expenditure review. This will be Chancellor Rishi Sunak’s second fall budget, where he will present tax and spending plans for the next three years.