We’ve included everything you need to know about the new Stamp Duty changes in this guide but you can message or call our brokers if you have any niggling questions of your own.
The Stamp Duty deadline has been and gone but if you’re buying a property in England or Northern Ireland, you may still be able to save on SDLT before rates return to normal in October.
What is Stamp Duty (SDLT)?
If you’ve never bought property before, you might not have heard of Stamp Duty but it’s important to know what it is and how it works because this tax affects how much you pay when you buy a home or second property.
When you buy property, whether that be a house, flat, or bungalow, you’ll have other costs to include other than the property itself, like conveyancing fees, solicitors fees, and yep, you guessed it, Stamp Duty.
Stamp Duty (SDLT) is the tax that people in England and Northern Ireland pay when they purchase property and as of the 1st of July, 2021, it has changed.
How much will Stamp Duty be in 2021?
For properties costing £500,000 on less, first-time buyers will pay no Stamp Duty on the first £300,000, and pay 5% on the remaining amount, up to £200,000, for the period 1 July 2021 to 30 September.
Those who have purchased property before (next-time buyers) will have to pay the tax on the value of a residential property purchase over £250,000, as opposed to the previous £500,000 threshold which ended in June 2021.
People buying a second property will still pay the additional 3% charge in SDLT but they too can benefit from reduced rates.
The nil rate band will return to the standard amount of £125,000 on 1 October 2021.
When did the Stamp Duty deadline end?
The Stamp Duty holiday was originally due to end in March 2021 but the deadline was extended by three months, to June the 30th, 2021.
Before the Stamp Duty deadline came to a halt, first-time buyers, those who had purchased property before and property investors, were exempt from paying SDLT on purchases up to £500,000.
Rishi Sunak introduced the temporary Stamp Duty Land Tax (SDLT) back in July 2020 to help boost the housing market following the first national lockdown.
Sunak stated that the nil-rate band would be increased to £500,000 from 8 July 2020 until 30 June.
That meant that any properties valued at up to £500,000 were exempt from the tax, saving some buyers up to £15,000.
Why was Stamp Duty-free before?
It was hoped that by cutting Stamp Duty, more people would be encouraged to buy property, which would help stimulate the economy and increase demand for the construction industry.
Eager buyers rushed to meet the SDLT deadline creating a surge in demand and a subsequent increase in property prices but many property experts warned the government that if the Stamp Duty nil rate band returned to £125,000 too rapidly, demand would drastically dip, thus creating a ‘cliff edge’ effect.
Consequently, the 0% Stamp Duty threshold has now been reduced from £500,000 to £250,000 for three months until 30 September 2021 before it returns to the previous threshold of £125,000.
The tapered approach could provide more buyers the opportunity to purchase property with a reduced Stamp Duty rate.
That being said, the SDLT holiday has been credited as being a significant contributor to the big rise in house prices and some argue that the tapered approach only prolongs the period in which property prices will continue to rise.
Did the SDLT holiday increase property prices?
As recorded by Hometrack, UK house property prices have increased by an average of £10,246 per property over the past 12 months, so the potential £2,500 savings made from Stamp Duty can become outweighed by the additional cost of the property being purchased.
Nationwide’s house price index also reports surging property prices, and their data concluded that the average house price increased by 13% in the year to June, reaching a high of £245,432.
Furthermore, the Hometrack UK House Price Index found that the total stock of homes for sale remains constrained and is down 24% in the year to mid-June compared to the average in 2020.
Rises in inflation, the end of the Stamp Duty holiday, demand for country living, and an ever-decreasing supply of properties have arguably driven property prices, and in many cases, though not all, these increases have eaten into the tax saving that was intended by the Chancellor and the Conservative government.
What will happen to house prices in 2021/2022?
That’s difficult to predict but once the threshold returns to £125,000 in October 2021, there could be less of a demand for property both residential and buy-to-let as most people would have likely tried to meet the SDLT deadline on June 31st, 2021 to save money.
That could create a period of fewer property transactions which could result in a price drop, as there is less demand for the supply of homes.
Will property prices fall soon?
The furlough scheme also comes to a close in October 2021, so, many Brits could be unable to buy due to a lack of income, contributing to a drop in demand.
Furthermore, a potential rise in unemployment may result in some current homeowners having to sell their property to downsize and reduce outgoings which could then create additional supply, possibly contributing to a property price drop.
As it stands, there is no clear projection for what will happen to house prices in 2021 and 2022 but it’s always wise to seek advice from a financial expert as well as a mortgage broker, ahead of deciding on buying a property.
A mortgage broker will be able to calculate how much Stamp Duty you’ll pay, as well as compare the market for the cheapest lenders. Whether house prices rise or fall, take your time to do your research or ask an expert who can do it for you.
What are the Stamp Duty changes for residential purchases?
The temporary increase to the nil rate band for Stamp Duty Land Tax (SDLT), which is the rate before you start paying SDLT on residential property, has been extended.
Reduced rates of Stamp Duty Land Tax (SDLT) will apply for residential properties purchased from 1 July 2021 to 30 September 2021 inclusive.
Rather than ending on 31 March 2021, the temporary nil rate band of £500,000 will be in place until 30 June 2021.
Then from 1 July 2021 to 30 September 2021 the nil rate band will be £250,000.
The nil rate band will return to the standard amount of £125,000 on 1 October 2021.
Stamp Duty rates from 1 July 2021 to 30 September 2021 for next-time buyers
If you’re a next-time buyer (no longer a first-timer!) and you purchase a residential property between 1 July 2021 to 30 September 2021, you only start to pay SDLT on the amount that you pay for the property above £250,000.
Property value | SDLT rate |
Up to £250,000 | Nil |
The next £675,000 (the portion from £250,001 to £925,000) | 5% |
The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
The remaining amount (the portion above £1.5 million) | 12% |
Stamp Duty rates for next time buyers from 1 October 2021
Property value | SDLT rate |
Up to £125,000 | 0% |
The next £125,000 (the portion from £125,001 to £250,000) | 2% |
The next £675,000 (the portion from £250,001 to £925,000) | 5% |
he next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
The remaining amount (the portion above £1.5 million) | 12% |
Stamp Duty changes in 2021 for additional purchases
Those purchasing additional property have always had to pay an additional 3% charge in SDLT on top of the rates for each band but the threshold that affects how much of their property’s value is taxable has changed.
From 8 July 2020 to 30 June 2021, the SDLT threshold change meant that investors and those purchasing additional property (second homes or holiday homes) didn’t have to pay the regular tax on purchases up to £500,000.
The new changes which came into effect on the 1st of July, 2021, have reduced that threshold to £250,000 and therefore require those purchasing second or additional property to pay 3% SDLT on transactions over £250,000.
From October 1st, 2021, the threshold reverts to £125,000 and the higher rates of SDLT will then apply on top of the standard rates of SDLT (£125,000).
Stamp Duty rates for additional purchases from 1 July 2021 to 30 September 2021
Property value | SDLT rate |
Up to £250,000 | 3% |
The next £675,000 (the portion from £250,001 to £925,000) | 8% |
The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
The remaining amount (the portion above £1.5 million) | 15% |
What are the Stamp Duty changes for first-time buyers?
From 1 July 2021, if you’re a first-time buyer in England or Northern Ireland, you’ll pay no Stamp Duty on properties worth up to £300,000 as opposed to the previous threshold of £500,000.
If the property you want to buy costs upwards of £500,000, you’ll pay no Stamp Duty on the first £300,000 but you will have to pay SDLT at the relevant rate of 5% on the remaining amount, up to £200,000.
Stamp Duty rates for first-time buyers from 1 July 2021 to 30 September 2021
Property value | SDLT rate |
Up to £300,000 | 0% |
Up to £500,000 | 5% (on the amount higher than £300,000 up to £500,000. |
If the property you want to buy is worth over £500,000, you won’t be eligible for first-time buyer Stamp Duty relief and you’ll have to pay the standard rates of Stamp Duty.
Stamp Duty Land Tax changes: FAQs
What is the nil band rate?
The Nil-Rate Band for Stamp Duty is the threshold from which no SDLT is payable. So, if the threshold is set at £250,000, the buyer only pays Stamp Duty on the value of the property that is higher than this amount.
What does tapering Stamp Duty mean?
Lots of experts are referring to a tapered approach, which essentially means that the Stamp Duty break is being phased out gradually as opposed to reverting to the previous rate suddenly.
Is there a Stamp Duty calculator I can use?
Yes, you can find out how much you will pay by using the government’s Stamp Duty tax calculator.
Can I renegotiate the asking price if I have missed the Stamp Duty holiday?
Have your solicitor thoroughly check your agreement with the housing developer or seller as if there is a clause that allows for price adjustments in light of a delay caused by the seller that has caused you to miss the Stamp Duty deadline, it may be possible. If your contract doesn’t provide for this situation and you’ve agreed to pay a price, you may have to proceed and pay SDLT or alternatively, pull out of the transaction.
Has Stamp Duty changed in Scotland?
In July 2020, the starting point for land and buildings transaction tax (LBTT) in Scotland was increased to £250,000, but the concession stopped on 1 April, when the England and Northern Ireland holiday was originally due to end.
In Scotland, the current rates of Land and Buildings Transaction Tax are:
0% on £0-£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
Scottish landlords pay an extra 4% Land and Buildings Transaction Tax on top of standard rates.
Has Stamp Duty changed in Wales?
Stamp Duty was replaced by Land Transaction Tax in April 2018.
On 1 July 2021, the nil rate band of LTT for residential property transactions reverted to £180,000 and £225,000 for non-residential land and property.
To calculate how much LTT you might pay for a property in Wales, you can use the Welsh Government's Land Transaction Tax calculator.