What is the stamp duty change from July 2021?

The 0% band for stamp duty in England is now reduced to £250,000 from 1 July 2021 for those buying their main home. Second home buyers and buy-to-let purchases will incur a 3% rate on properties up to £250,000.

The stamp duty holiday was introduced in July 2020 to help support the housing market during the Coronavirus pandemic. This holiday removed stamp duty land tax on properties up to £500,000 excluding second homes and buy-to-let. The stamp duty holiday was set to end on 31 March 2021 and was then extended while England and Northern Ireland remain in varying states of lockdown.

What changes are planned for Stamp Duty in October 2021?

From 1 October 2021 Stamp Duty tax changes again and will differ depending on whether you are a first-time buyer, buying a main residence, or buying a second-home or buy-to-let property. Those buying a main residence that are not first-time buyers will have a 0% band up to £125,000, while those purchasing a second home or buy-to-let property will only have 0% band up to £40,000. First time buyers will receive a more generous 0% band up to properties with a value of £300,000.

Have the tax bands changed in Scotland and Wales?

The Scottish and Welsh devolved Governments decided not to change their levels of property transaction tax. In Scotland, the 0% band remains for properties up to £145,000 and in Wales £180,000 (for residential sales only).

Did the stamp duty holiday help boost the housing market?

House prices increased by 13% in the 12 months up to June 2021 according to data from Nationwide Building Society. The Nationwide Building Society states this the fastest increase seen since November 2004. Demand for mortgages has increased based on Moneyfacts.co.uk’s mortgage search data. The number of first-time buyer mortgage searches has surged by six-fold at points since the start of the holiday.

This demand for spacious properties and a shortage of housing stock will have compounded the demand effect further. Buyers have also been taking advantage of some of the lowest mortgage rates in history, with the best two-year fixed rate mortgage rate now below 1%. Buyers must check carefully the total cost of their borrowing as some of the lowest rate mortgage deals also have the highest one-off fees.

There is more help for first-time buyers

First-time buyers can now buy a property up to £300,000 and not pay any stamp duty. The introduction of the Government’s Mortgage Guarantee Scheme (MGS) has seen an increase in the number of lenders offering 95% loan-to-value (LTV) mortgages. This has also triggered other lenders to release higher rate LTV mortgages outside of the scheme.

MGS offers lenders a guarantee of up to 15% to cover their losses if a buyer can no longer pay their mortgage and the property is repossessed. Another alternative scheme is Help to Buy that offers a loan to buyers to help top up their deposit so they can access mortgages at lower LTVs. 80% LTV mortgages come with lower rates and are therefore cheaper than those at a higher LTVs.