With lockdown measures lifting and life slowly returning to normal, 30th June 2021 also saw the phased ending of the Stamp Duty holiday. First announced in July last year, the holiday removed paying stamp duty on the first £500,000 of a purchase price, which sent the property market into overdrive given pent-up demand for buyers and the so-called ‘race for space’. According to Nationwide Building Society, house prices increased by 13% in the 12 months up to June 2021 - the fastest increase seen since November 2004.
Over the past year the property market has witnessed strong demand for larger homes with outdoor space or in greener locations, so many buyers have enjoyed saving a small fortune on Stamp Duty. If you are awaiting completion on your next home or considering buying a property in the next few months, the great news is you can still benefit from a Stamp Duty saving. The reduced tax-free threshold of £250,000 still gives a saving of £2,500 for home movers until 30th September 2021. Alongside mortgage rates at an all time low, it is a great time to buy.
What is Stamp Duty?
When purchasing a property, the words ‘stamp duty’, ‘extra charges’ and ‘land tax’ may be daunting. Simply put, you must pay Stamp Duty Land Tax (SDLT) if you buy a property over a certain value. This tax differs depending on the country you are buying in.
The government states you must pay stamp duty if you:
• buy a freehold property
• buy a new or existing leasehold
• buy a property through a shared ownership scheme)
• are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house
How much Stamp Duty Land Tax do I pay?
If you are buying a residential property, there are different rates of tax liability, these include:
• If you are a first-time buyer
• If you already own a property and you are buying an additional property
• If you are not a UK resident
You can use HM Revenue and Customs’ (HMRC) Stamp Duty Land Tax calculator to work out how much tax you will pay.
The current threshold for paying Stamp Duty Tax on residential properties is £250,000. Therefore, if you purchase a property for less than £250,000 you currently do not need to pay SDLT but this rule is set to change on 1st October 2021 to the lower amount of £125,000.
What is likely to happen now?
Whilst the 30th June deadline saw the end of the opportunity to make the biggest savings on Stamp Duty, the property market is likely to remain strong into the future. Demand from buyers remains high, with savings pots having grown during Covid and very attractive mortgage rates available. Demand at this level will continue to support property prices too.
Head of Portico Finance, Steve Jackson believes the end of the Stamp Duty holiday is in fact beneficial to buyers given current lower mortgage rates and lenders loan to income ratios.
He explains ‘On the back of the end of the Stamp Duty holiday we are now seeing more lenders coming in with lower mortgage rates, due to lower demand as people bought forward their purchases in order to save on stamp duty. He continues; ‘another positive we are seeing is the increase of lenders LTI (loan to income). This is when lenders increase their lending multiples, so we have seen for the majority lenders offering around 4.45 x a borrower’s income, this has been increased by some to 4.75 times, giving some borrowers a bigger budget than they thought.’
How can Portico Finance help you?
If you are looking to get onto the property ladder, Portico Finance, an FCA approved mortgage broker and protection service, can help get you the best possible mortgage deal with access to over 70 lenders as well as clarify the often-confusing property legal terminology.
To help celebrate Portico’s Financial services team, we are currently offering two very exclusive deals: Free broker fees for all new vendors
, as well as offering a free consultation regarding all the fees involved in any potential move (stamp duty, solicitors fees, agent’s fees etc), and provide impartial mortgage advice.
Free broker fees for all first time buyers if you register with Portico Finance by 30th September 2021.
If you need any more information about mortgages, get in touch with our Portico Finance team. Or, if you are looking to buy, sell or rent property, get in touch with our team on 020 7099 4000. Alternatively, click the link for a free online property valuation.