The stamp duty holiday came to an end on 1st July 2021, after almost a year. During the Covid-19 pandemic, the UK government announced the stamp duty holiday which was essentially a temporary suspension of the stamp duty tax. The stamp duty holiday was announced as a measure to boost the property market as well as the UK economy as a whole. So, now that the stamp duty holiday is over, what are the changes that will take place in the property market and the UK economy, and how will these changes affect you? Here is everything that you need to know.
What is the stamp duty holiday?
The stamp duty holiday was introduced on the 8th of July 2020, and it was initially supposed to end in September 2020; however, upon seeing the success of the stamp duty holiday, the government decided to further extend it until 30th June 2021. After the first extension, the stamp duty holiday was supposed to end in March 2021, but the government decided to extend it until June 2021, after which the stamp duty holiday came to an official end. If you were to ask an estate agent how much is my house worth in 2021, you would be pleasantly surprised with the answer! Given the success of the stamp duty holiday, special rates for first-time buyers were prevalent from 1st July 2021 till 30th September 2021.
How did the stamp duty holiday work?
From 8th July 2020 until 30th June 2021, buyers, investors, as well as first-time buyers had no pay no stamp duty on properties that were worth £500,000 or less. Buyers had to pay 5 per cent stamp duty for properties valued between £500,001 to £925,000 and 10 per cent stamp duty for properties between £925,001 to £1.5 million. The stamp duty for properties valued above £1.5 million was 12 per cent. From 1st July 2021 till 30th September 2021, first-time buyers had to pay zero stamp duty for properties under £250,000. For properties valued between £250,001 to £925,000, buyers had to pay a 5 per cent stamp duty, while the stamp duty was set at 10 per cent for properties valued between £925,001 to £1.5 million. The stamp duty remained at 12 per cent for properties valued above £1.5 million.
What happens now that the stamp duty holiday is over?
For one, the end of the stamp duty holiday will certainly affect people who are planning on buying a new home. First-time buyers are currently exempt from paying stamp duty for properties under £500,000, and most first-time buyers will buy properties which are under that price bracket. So, in essence, it is the property buyers who are buying their second or third homes, property investors as well as buyers who are looking to move into a new home that will be impacted by the end of the stamp duty holiday. As property prices have rapidly increased in the past few months, buyers might feel the pinch when they are looking to invest in new properties. For many buyers, the price of their current home might not have increased as much as the price of their new home, which in turn will mean pumping more money into their new home. With that being said, considering that the prices of property are almost sky-high, the saving on stamp duty will not really put too big a dent in the total cost. Secondly, during the stamp duty holiday period from July 2020 to June 2021, buyers could save as much as £15,000 on the purchase of their new home. However, with the new changes that came about to the stamp duty holiday from July 2021 till September 2021, buyers could save a maximum of £2,500, which is comparatively much lesser.
How will the end of stamp duty affect the property market?
At this point, it is uncertain how the end of the stamp duty will impact the property market in the long run. From March 2021 to March 2022, the average price of a property in the UK has risen by almost 10 per cent! Some experts believe that the average price of the property will continue to rise in 2022 at a quick pace, while others believe the rise will be slow and steady. A few experts believe property prices could start falling in 2022. Let’s keep in mind that the rise in property does not have an effect from March 2021 to March 2022 as it was during the period of the stamp duty holiday as well as once the stamp duty holiday ended. So, the property market does not seem to be too impacted by the end of the stamp duty holiday.