What is stamp duty?

Lately there’s been a lot of discussion around the stamp duty holiday in England. But, what is stamp duty? And what does it mean?

Stamp Duty Land Tax (SDLT) is a tax you must pay if you buy a property or land that is over a certain amount. This applies in England and Northern Ireland and currently, because of the stamp duty holiday, the threshold is £500,000 for residential properties and £150,000 for non-residential land and properties. For all those buying under these values, no SDLT needs to be paid.

The threshold before last July and what it would be returning to is £125,000 for residential properties and £150,000 for non-residential land and properties. First-time buyers are exempt from this and given relief for their property purchase.

Who pays stamp duty? 

We’ve established that those buying properties above the threshold will need to pay the tax. It is also worth noting that stamp duty applies to those who are buying outright as well as buyers with a mortgage – both freehold and leasehold properties.

What is a stamp duty holiday?

To boost the housing market and help the economy during the global pandemic, the Government introduced a stamp duty holiday in July 2020. What did this mean? It meant that only those buying property over the value of £500,000 would have to pay SDLT.

This was great news for those that were thinking about buying and resulted in increased activity as buyers were swayed to get looking sooner rather than later.  The stamp duty holiday can essentially save buyers thousands, which in an uncertain time when a lot of people were hit by financial hardship has been really helpful.

Additionally, it was great news for sellers. With the threshold being higher, they could expect a lot more interest from buyers. And more interest means more offers which often leads to a higher sale price.

The stamp duty holiday was planned to last until the end of March 2021 and as we approach this date, it’s being reconsidered for an extension. There is much debate about the pros and cons of the stamp duty holiday and implications across the property market. The Chancellor is considering an extension to the tax-relief of 6 weeks to allow for property sales that are currently caught in the middle of transactions to complete in time. It is being debated in Parliament with uncertain outcome as we write.

Whether you agree with the tax relief or not, it certainly helped to revitalise the market after the initial lockdown and we saw very high levels of activity in the last two quarters of 2020. House prices rose in many areas and confidence to buy property was strong.

Spring is traditionally a very good time to buy and sell property and, with or without the stamp duty holiday, many people will be eager to explore a move, especially after what has been an extended national lockdown. Working from home and, for many, managing home-schooling too, has meant a period when many of us have had time to re-evaluate where and how we live and this will undoubtedly lead to more people selling and buying property.

Stamp duty calculator

To work out how much tax you would pay on a property, there is a Stamp Duty Land Tax Calculator provided by HMRC.

If you are looking to buy in Hertfordshire, Essex and surrounding areas we are here to guide you through it. Contact a member of our team and we’ll be happy to help.

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