Stamp duty holiday tapers off from 1st July 2021

Key points:

  • The holiday saw stamp duty on transactions of properties up to £500,000 in England and Northern Ireland cut to 0%
  • The holiday will enter an interim period until 30 September 2021

The temporary holiday for stamp duty land tax is set to start tapering off from 1st July 2021, as the UK continues its gradual easing of restrictions.

Introduced by Chancellor Sunak on July 8, 2020, the holiday saw stamp duty rates on transactions of properties up to £500,000 in England and Northern Ireland cut to 0% to stimulate the housing market during the worst of the pandemic. It meant a saving of up to £15,000 for people buying homes.

Landlords and second-home buyers were also able to make use of the tax cut, but they still had to pay the extra 3% of stamp duty they were charged under the previous rules.

From 1st July 2021, the holiday will enter an interim period in which the 0% rate will apply to properties valued up to £250,000.

This will be the case until 30th September 2021 after which time rates will revert to their normal pre-pandemic levels.

Here is a detailed breakdown of the rates;

Stamp duty holiday tapers off from 1st July 2021
Stamp duty holiday tapers off from 1st July 2021
Residential property price8 July 2020 to 30 June 20211 July 2021 to 30 September 20211 October 2021 onwards
More than £1.5m12%12%12%

Stamp duty holiday pushes 1.8m houses into a higher land tax bracket

Intense market activity over the last 12 months has accelerated house price growth, pushing 1.8m UK properties into a higher stamp duty bracket. The figures released by Zoopla show that nearly 940,000 additional properties now attract some level of stamp duty at 5% should they sell, and an extra 130,000 will command some level of stamp duty at 10%.

According to the property website, the average additional stamp duty payable on homes that have moved up into the 10% stamp duty band will be around £6,100 after the end of the tapered stamp duty holiday in September, while the additional cost for the average home that has moved up into the 5% band will be around £725.

At the same time, demand for properties priced over £250,000 has dipped by a third since April, the last point at which buyers could try to benefit from the maximum stamp duty land tax saving but remains up 86% compared to average 2019 levels. Buyer demand for properties below £250,000 is down 24% in England from the high seen in April.

The figures also report that the number of homes in the lower stamp duty bands in England is falling, while price growth means it is rising for the top bands. The largest share of demand is for homes priced up to £250,000, meaning they are stamp duty exempt until the end of September when the tapering period comes to an end.

A Treasury spokesperson said:

“The temporary stamp duty cut is helping to protect hundreds of thousands of jobs which rely on the property market by stimulating house moves. Official HMRC figures show it’s working, with transactions up 138% last month compared with June 2020.”

As of 30 June 2021, the extended stamp duty holiday, which means that no tax will be levied on the first £500,000 of property purchases, comes to an end.

The stamp duty tax holiday will taper onwards until 30 September 2021 meaning that you do not pay stamp duty tax on properties purchased up to £250,000.

Grainne Gilmore, head of research, Zoopla, said:

“The stamp duty holiday boosted demand in the housing market, yet buyer demand remains elevated despite the initial holiday ending – signalling that the once-in-a-generation reassessment of home has further to run this year. The total stock of homes for sale continues to run well below historical norms, and this will underpin pricing. At the same time, it may also constrain potential activity, especially for buyers looking for family houses. Even so, we forecast that this year will be one of the busiest for the housing market since the global financial crisis with 1.5m residential transactions.”

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