March 31st is just over a month away now, but over the course of just one week, what once was a seemingly daunting deadline has completely lost its bite.
On Tuesday, The Times reported that Rishi Sunak is reportedly preparing to extend the stamp duty holiday. The current deadline is March 31st; however, it is rumoured the extension would see the stamp duty holiday continue until the end of June.
This extension is expected to be announced on March 3rd – during next week’s budget – following relentless campaigning from experts and professionals involved in the property industry, urging Sunak to consider the extension and save those currently scrambling to get a deal across the line. According to Rightmove, an additional 300,000 property transactions in England could potentially benefit from the extension. If these additional transactions now make it through before the new deadline, Rightmove estimates that the buyers could save a massive £1.75bn in total.
The current rates in the UK state that anyone purchasing a primary residence valued below £500,000 will not have to pay any stamp duty tax, but as the tax band increases a charge is introduced. For a property between £500,001 – £925,000, stamp duty tax stands at 5%; 10% for a property valued between £925,001-£1.5m, and 12% for anything over £1.5m.
The rates differ when it comes to buy-to-let properties, however. Investors will currently pay 3% stamp duty tax for properties valued below £500,000; 8% for those between £500,001-£925,000; 13% for those between £925,001-£1.5m; and 15% for properties valued at over £1.5m.
Following the deadline, whether that be March 31st or the end of June, the rates will stand as follows. For a primary residence between £0-£125,000, 0%; 2% between £125,001-£250,000; 5% between £250,001-£925,000; 10% between £925,001-£1.5m; and 12% for £1.5m+. For a buy-to-let property, the rates will stand at 3% between £0-£125,000; 5% between £125,001-£250,000; 8% between £250,001-£925,000; 13% between £925,001-£1.5m; and 15% for £1.5m+.
The stamp duty holiday has been a major contributing factor to the property markets impressive performance throughout the unprecedented economic turmoil the pandemic has caused. According to new data from the Office for National Statistics, UK average house prices increased by 8.5% over the year to December 2020, standing at £269,000, whilst Paragon Bank also found that tenant demand reached a five-year high last year, up an impressive 25% from the year prior – both proving the property market’s resilience amidst uncertainty.
This increased motivation to beat the stamp duty paired with the ever-increasing tenant demand has seen the interest in buy-to-let property soar. According to HMRC, residential property transactions increased by 24.1% in January 2021, a rise of 24.1% when compared to January 2020 – likely fuelled by the rush to beat the initial stamp duty deadline.
Now, with the rumoured extension of the stamp duty holiday, the property market can expect to experience an extremely prosperous few months in the lead up to June. Many investors who may have left it too late to beat the original deadline will surely act now to avoid the same disappointment, fuelling a flurry of investments throughout the next 3 months – paving the way for an incredible year for the UK property market.
If you interested in investing in buy-to-let property? Knight Knox have numerous property investment opportunities in cities across the UK. Browse through their portfolio here.