Stamp Duty Holiday 2020

How to take advantage of this new tax-cut and save up to £15,000* until Spring 2021

As we emerge out of lockdown in the wake of the COVID-19 pandemic, the UK government has slashed stamp duty on properties worth up to £500,000 in England and Northern Ireland. Depending on where you are on the property ladder, the 2020 Stamp Duty holiday could mean savings of up to £15,000! Read on to find out what savings you could make and what impact, if any these changes will make to the property market.

First-time buyers in London

First-time buyers are already exempt from paying stamp duty on properties costing up to £300,000. With the average cost of a first-time home in England standing at £208,000, it seems on first glance that first-time buyers don’t stand to benefit too much.

However, with the average cost of a first-time home in London standing at £426,000, it’s the Capital’s first-time buyers who stand to benefit most out of this move. Money that would usually be allocated to stamp duty can now be used towards a deposit.

Table showing stamp duty savings for first time buyers

A comparison table of Stamp Duty 2020 holiday savings first-time buyers could make under the new rules.

Home-movers and shakers, how do people looking to move up the property ladder benefit?

People who fall into this segment stand to benefit the most out of the temporary shift in stamp duty tax. Stamp duty usually kicks in at £125,000, but until 31 March 2021, the threshold has now risen to £500,000, which means significant savings can be made for those looking to make a move to a new home.

With the average cost of property standing at £482,465 in SW16 in July 2020 and £342,828 in Croydon (according to Zoopla) this means Heaven Estate Agents’ clients stand to make a real saving in the cost of moving in the current climate. With commuting time into Central London only taking 22-minutes from Norbury which is conveniently in zone-3, now is undoubtedly an excellent time to move to a larger property while still being able to reap the benefits of excellent transport links.

A comparison table of Stamp Duty 2020 holiday savings home-movers could make under the new rules.

Property investors: does the stamp duty break also extend to buy-to-let landlords?

The short answer to this is YES!

In England and Northern Ireland, buy-to-let landlords and people buying a second home are required to pay a 3% surcharge. Someone falling into this category buying a £500,000 home would normally pay:

  • 3% on the first £125,000 (£3,750)
  • 5% on the next £125,000 (£6,250)
  • 8% on the remaining £250,000 (£20,000)
  • With the total stamp duty bill coming to a whopping £30,000!

Under the temporary shake-up to the stamp duty threshold, property investors and second-home buyers are now only required to pay 3% on the whole £500,000, resulting in a 50% saving. For an indication of what savings can be made on a sliding scale, see the table below.

A comparison table of Stamp Duty 2020 holiday savings property investors and buy-to-let landlords could make under the new rules.

A word of warning on how these changes could impact property prices

On first inspection, these changes to the stamp duty threshold suggest that there are some savings to be made. However, with limited stock on the market, any savings made by the cut in stamp duty are likely to drive the cost of available properties up as buyers compete to buy a new home. If property prices fall later this year like many experts are predicting, then any savings made will have been lost. With this in mind, it is vital when you choose to buy a new property; you opt for an estate agency that gives honest property valuations and doesn’t inflate the value of a property to make more profit. That way, you know you can benefit from the savings made in stamp duty, and you do not run the risk of negative equity should there be a downturn in the market.

A bung for landlords or a boost for the buy-let market?

The Labour Party’s response to the temporary changes in stamp duty was to describe the move as a ‘bung for landlords’ as opposed to boosting the rental supply chain. Changes over recent years to the tax implications for landlords saw many landlords leave the market which inadvertently pushed the cost of renting up, particularly in London and the South East. It is hoped that the cut in stamp duty for buy-to-let landlords will entice them back.

We may see some use the cut in stamp duty as an opportunity to move up the ladder and rent their former home, a chance they may not have had if the reduction in stamp duty had not been made.
If you are an established property investor and have been looking to extend your portfolio, then this is undoubtedly an opportunity to lower the cost of acquisition. As with all major purchases, doing your research is key to finding a good, long-term investment.

Beware the length of the chain

If you have decided that this was the gentle nudge you needed to make a move to a new property, then make sure you time it well. From our experience, it can take anywhere between 8 – 15 weeks for the sale of a property to go through. As always, finding a buyer can take some time, and if the sale of your property and purchase of your new home is in a complex chain, it could take longer.

To benefit from the temporary cut in stamp duty, time is of the essence. Summer is usually a quiet time for the property market, but as we navigate our way out of lockdown and try and get back to normal post COVID, many people are choosing not to go on holiday are staying in the UK. If you want to make a move then we advise you to start your search now, and if you are looking to sell, then we recommend putting your property on the market as soon as possible. People coming to the market towards the end of the year may find themselves at the mercy of the 31 March 2021 deadline, and if they don’t have the right team of estate agents and solicitors working hard to push the sale/purchase through, they miss the deadline.

How can Heaven Estate Agents help?

If you are looking to buy your first home or you are looking for your next dream home, our dedicated sales team is here to help. With the added benefit of extensive local knowledge gained after living in Norbury and South London for many years, and working for some established local competitors Heaven Estate Agents can be called upon to give an honest market appraisal of your property and to tell you about the hidden gems in the local area.

A boutique estate agency with a difference, Heaven Estate Agents provides a friendly, professional and trustworthy service. Regarded as one of most respected family run independent estate agents in the area, our promise to you is to offer a no-nonsense approach to helping you get on, and move along the property ladder, where we put our reputation above profit. Get in touch to find out how we can help.

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