Everything You Need To Know About The Stamp Duty Holiday Extension

Chancellor Rishi Sunak has announced the stamp duty holiday will be extended for a further three months until the end of June. The extension, which will apply to all buyers, means people in England and Northern Ireland will not have to pay the tax on homes worth up to ￡500,000 if they complete – in other words, legally transfer ownership of the property – before June 30.

To avoid a ‘cliff edge’ at the end of this period, stamp duty will not be charged on the first ￡250,000 of a property purchase between 1 July and 30 September. The threshold for the nil rate band will then fall back to ￡125,000 on 1 October. The extension of the holiday means nine out of 10 people buying a property will not have to pay stamp duty, saving them an average of ￡4,500 each and a maximum of ￡15,000 for those purchasing a home costing ￡500,000.

The stamp duty extension to June means a further 234,000 buyers who have already agreed a sale will save an estimated ￡987m on stamp duty. And those who agree a sale from now will be guaranteed savings of up to ￡2,500 as long as they complete before the end of September. This will take 46% of homes out of stamp duty until the end of September. This removes a major cost from moving home that hits hardest in southern England where the mortgage guarantee is less effective. 

Why has the stamp duty holiday been extended?

The Chancellor announced the stamp duty holiday in July 2020 to help kickstart the housing market in England and Northern Ireland following the first national lockdown. The tax break, combined with many people carrying out a once-in-a-lifetime re-assessment of their housing needs in the face of the pandemic, triggered a mini home buying boom But the steep spike in housing transactions led to a congested sales pipeline and the home buying process taking longer than usual. We estimated that around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline. And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.

Can you still buy a home before the stamp duty holiday ends?

Yes, hundreds of thousands of buyers who have already agreed a sale with little or no expectation of making stamp duty savings will benefit from the Chancellor’s three-month extension to the main stamp duty holiday. Buyers who are now looking for a new home could benefit from the full savings of up to ￡15,000 if they complete their sale within less than four months. But all buyers who enter the housing market within the next three months are very likely to benefit from savings of up to ￡2,500 if they complete by the end of September. Some 234,000 sales have been agreed since mid-December, with one in five of these transactions in the south east of England. Buyers in the south east will make savings of ￡271m. Total savings across the country, allowing for four months between sale agreed and completion, is around ￡987m.

If you're looking to take advantage of the stamp duty holiday, you'll need to have your ducks in a row well before it ends. The time it takes between agreeing a sale and completing is normally around 90 days. But research shows that the average time for a sale to cross the line is now just under four months – around a fortnight longer than normal. 

What happens when the stamp duty holiday ends?

Once the stamp duty holiday ends on 30 June, there will be an interim period until 30 September when the tax-free threshold will fall to ￡250,000. The tapering move means that nearly half of housing sales in England will be free of stamp duty. Last year, some 46% of all home sales were for properties of up to ￡250,000.

What are the stamp duty thresholds from 1 October 2021?

The former stamp duty rules will apply from 1 October. This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property. Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.

For existing homeowners, the rates are:

• 0% up to ￡125,000
• 2% on ￡125,001 - ￡250,000
• 5% on ￡250,001 - ￡925,000
• 10% on ￡925,001 - ￡1.5m
• 12% on any value above ￡1.5m

For example, if you buy a flat for ￡275,000, the stamp duty you owe would be:

• 0% on the first ￡125,000 = ￡0
• 2% on the next ￡125,000 = ￡2,500
• 5% on the final ￡25,000 = ￡1,250

Total stamp duty = ￡3,750

Landlords and second-home owners

For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply. However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%. It is also possible under some circumstances to claim multiple dwellings relief.

Non-UK residents

From April 2021, an additional 2% stamp duty levy will be imposed on non-UK residents who buy property in England and Northern Ireland. It means that international buyers of second homes could pay up to 17% tax on expensive properties. The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.

Who remains exempt from stamp duty?

First-time buyers are exempt from paying regular stamp duty on properties costing up to ￡300,000 and pay 5% on the value of a property between ￡300,000 and ￡500,000.

A first-time buyer will pay:

• 0% on the first ￡300,000
• 5% on the remainder up to ￡500,000

So a first-time buyer purchasing a ￡275,000 flat would pay no stamp duty.

For a house costing ￡475,000, a first-time buyer would pay:

• 0% on the first ￡300,000 = ￡0
• 5% on the final ￡175,000 = ￡8,750

Total stamp duty = ￡8,750

However, if the purchase price is more than ￡500,000, first-time buyers cannot claim the relief and must pay the standard rates.

For example, a property purchased at ￡700,000 would result in a stamp duty bill totalling ￡25,000 even for a first-time buyer. 

Stamp duty relief was introduced in November 2017 to help people step onto the property ladder. 

When do you pay stamp duty?

You must pay stamp duty within 14 days of completing your property purchase. Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.

What other government support is available?

During the second lockdown, the government extended its offer of mortgage payment holidays. Borrowers who need help paying their mortgages can still request a holiday of up to six months until 31 March 2021. Meanwhile, the government's Help to Buy scheme offers an equity loan to buyers with a 5% deposit. The initiative will close on 31 March and be replaced with a new version, which will only be available to first-time buyers.

The Chancellor also announced a new scheme in the Budget under which home buyers will be able to take out a 95% mortgage, with the government acting as guarantor.  The scheme comes after Prime Minister Boris Johnson pledged to "turn generation rent into generation buy" at the Conservative party conference in October last year. A number of lenders have already signed up to the scheme, which will launch next month. 

What about stamp duty in Scotland and Wales?

Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland. Scotland and Wales have equivalent taxes, and similar breaks have been introduced.

Scotland

In April 2015, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT).

In Scotland, the LBTT rates are:

• 0% up to ￡145,000
• 2% on ￡145,001-￡250,000
• 5% on ￡250,001-￡325,000
• 10% on ￡325,001-￡750,000 
• 12% on any value above ￡750,000

First-time buyers pay no LBTT up to ￡175,000.

Wales

Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.

LTT rates are:

• 0% up to ￡180,000
• 3.5% on ￡180,001-￡250,000
• 5% on ￡250,001-￡400,000
• 7.5% on ￡400,001-￡750,000
• 10% on ￡750,001-￡1.5m
• 12% on any value above ￡1.5m

In December, the Welsh government introduced an additional charge for second-home owners. Second home-owners will now pay a 4% levy when they buy homes up to ￡180,000, rising to 16% for homes worth ￡1.6m or above.