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4 Things Property Investors Need to Know About The Stamp Duty Holiday

Due to the Covid-19 pandemic, the UK went into a state of complete lockdown.

During the first lockdown, no real estate transactions were allowed.

That meant buyers and sellers who were in the middle of a deal paused the proceedings, estate agents and property inspectors had to halt their services, and houses on the market could no longer be sold within days.

As the lockdown lifted, the property market picked up.

However, the UK went into a second lockdown.

Real estate transactions were allowed during the second lockdown, and estate agents got back to work, but the real estate market was not picking up quite as quickly as expected.

To boost the housing market in the UK and the economy as a whole, the UK government announced a stamp duty holiday.

Thanks to the stamp duty holiday, anyone purchasing property under £500,000 no longer had to pay stamp duty.

Say you were looking to buy property in Manchester.

You could get in touch with estate agents in Manchester who can help you find a property, negotiate a good deal and so on.

A buyer could save thousands of pounds on their purchase and perhaps use that extra cash on some useful home improvements.

What is the Stamp Duty Holiday?

The stamp duty holiday is a temporary suspension of stamp duty on the purchase of a property.

As for the properties above £500,000, the stamp duty was reduced.

For properties between £500,000 to £925,000, the stamp duty was reduced to 5 per cent while for properties between £925,000 and £1.5m, the stamp duty was reduced to 10 per cent.

Till when can one avail the benefits of stamp duty holiday?

Initially, Chancellor Rishi Sunak announced that the stamp duty holiday would go on till September 2020.

It was then extended to March 2021.

Seeing the success of the stamp duty holiday and the number of buyers who benefited from the stamp duty holiday, the UK government announced that the stamp duty holiday had been further extended till 30th June 2021.

However, from 1st July 2021, there will be a slight change in the Stamp Duty Land Tax.

Buyers who are purchasing property up to £250,000 will have to pay no stamp duty.

Buyers who are interested in buying properties between £250,001 and £925,000 will have to pay 5 per cent stamp duty, while those looking at properties ranging from £925,001 to £1.5 million will have to pay 10 per cent stamp duty.

The stamp duty for properties above £1.5 million will continue to remain at 12 per cent.

What Happens If I Buy Additional Properties?

From 8th July 2020 to 30th September 2021, property investors or any buyer purchasing an additional property will have to pay 3 per cent additional duty on the property’s total value.

So, from 8 July 2020 to 30 June 2021, investors will have to pay 3 per cent on properties up to £500,000, 8 per cent for properties between £500,001 and £925,000, 13 per cent for properties valued from £925,001 to £1.5 million and a whopping 15 per cent for properties above £1.5 million.

From 1st July 2021, the additional 3 per cent will be charged based on the revised stamp duty land tax.

Keep in mind and this additional 3 per cent is only for people purchasing other properties apart from their dwellings.

If you are buying your first home or have already sold your home before buying a new property, you do not need to pay an additional 3 per cent.

This additional 3 per cent is for property investors and buyers who are purchasing more than one property.

Is the Stamp Duty Holiday Benefiting Me As An Investor?

Let’s put things into perspective.

In 2019, buying a property worth £500,000 in the UK would mean putting a 20 per cent down payment.

That amounts to £100,000.

Plus, buyers will also have to pay a 6 per cent stamp duty tax, which would mean another £30,000.

With the stamp duty holiday, the cost of purchasing a home has gone down tremendously.

Instead of the usual 6 per cent, property investors will have to pay just 3 per cent of the total value of the property as stamp duty, which means £15,000.

If buyers use the upcoming mortgage guarantee scheme under which they only need to pay a deposit of 5 per cent for the mortgage, the value of the down payment also reduces drastically.

Instead of paying £100,000 as the down payment, buyers and investors will only have to pay £25,000.

By using the mortgage guarantee scheme and the stamp duty holiday, investors and buyers will be able to save thousands of pounds on their new purchase!