The gradual phasing out of the government’s temporary stamp duty holiday began on July 1. Following a period during which transactions valued at £500,000 or less were exempt from stamp duty liability, this threshold was cut in half to £250,000.
From July 1 to September 30, these are the stamp duty rates payable for property purchases in England and Northern Ireland:
- £0-£250,000 = 0%
- £250,001-£925,000 = 5%
- £925,001-£1,500,000 = 10%
- £1,500,000+ = 12%
However, the transition back to standard stamp duty thresholds is set to happen next week, on October 1. Unless the government introduces a surprise extension to the scheme at the last minute, these are the tax bands that will apply for purchasing homes in England and Northern Ireland:
- £0-£125,000 = 0%
- £125,001-£250,000 = 2%
- £250,001-£925,000 = 5%
- £925,000-£1,500,000 = 10%
- £1,500,000+ = 12%
Meanwhile, the equivalent tax in Scotland, the Land and Buildings Transaction Tax, now stands as follows, based on property values:
- 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
Landlords in Scotland also face an additional 4% Land and Buildings Transaction Tax on top of standard rates.
In Wales, the threshold for its land transaction tax (LTT) was increased in July last year to £250,000 to mirror the stamp duty holiday in England and Northern Ireland. As of July 1, normal land transaction tax rates once again resumed, as follows:
- 0% on £0-£180,000
- 5% on £180,001-£250,000
- 5% on £250,001-£400,000
- 5% on £400,001-£750,000
- 10% on £750,001-£1.5m
- 12% on any value above £1.5m
The same 4% additional premium payable by landlords also applies in Wales, on top of standard rates.
How will the stamp duty expiration affect the property market?
There has been widespread speculation that the initial pushback towards normal stamp duty thresholds in July would have a detrimental impact on the real estate sector. The vast majority of analysts predicted a major slowdown in mortgage applications and home purchases when stamp duty rates returned to normal in October.
Many are now questioning whether the alteration will have any real impact at all. With UK real estate market activity at an all-time high, it is becoming increasingly unlikely that the end of the incentive will trigger a sudden slowdown in transactions.
“The final closure of the Stamp Duty scheme at the end of September may have no impact at all,” commented Nicky Stevenson, managing director at Fine and Country estate agents.
“Other factors are so much more important, namely the race for space, low supply, accidental savings, and low-interest rates.”
Instead, the performance of the sector is expected to be fuelled by the ongoing exemption of stamp duty liability for all first-time buyers purchasing properties valued at £300,000 or less.
The return of the 95% LTV mortgage to the UK High Street is expected to motivate more buyers to take action before average property prices climb even higher.