Why July 1st Was Not Necessarily Stamp Duty Doomsday

The July 1st stamp duty deadline was seen as a black mark on the calendar by many prospective homebuyers. As of this date, the full stamp duty holiday officially came to an end, having been extended from its initial March 31 deadline.

Consequently, thousands rushed the completion of their property purchases to take advantage of potential savings of up to £15,000. But what many may not realise is that there is still a good degree of tax relief available for a sizeable proportion of prospective homebuyers.

Understanding the changes

The original stamp duty holiday, introduced last year in June, eliminated stamp duty liability for buyers of properties valued at £500,000 or less. Prior to this, the threshold had stood at just £125,000.

As of July 1, the £500,000 nil band threshold was decreased to £250,000. This will now remain in place until the end of September, during which all purchases of properties valued at £250,000 or less will be exempt from stamp duty.

This means that there are still significant savings to be made for the vast majority of home buyers in many regions of the country. Savings worth many thousands of pounds could, to a small extent, augment the skyrocketing costs of buying a home in the UK.

Alterations to stamp duty obligations

As of July 1, the thresholds that applied during the stamp duty holiday were reduced slightly, meaning the following rates now apply:

• £0-£250,000 = 0%
• £250,001-£925,000 = 5%
• £925,001-£1,500,000 = 10%
• £1,500,000+ = 12%

When the September 30 deadline passes and the stamp duty holiday is withdrawn entirely, the same rates as prior to the pandemic will apply:

• £0-£125,000 = 0%
• £125,001-£250,000 = 2%
• £250,001-£925,000 = 5%
• £925,000-£1,500,000 = 10%
• £1,500,000+ = 12%

However, there will still be significant savings available to first-time buyers. Anyone looking to purchase a home for the first time with a value of £300,000 or less will be exempt from stamp duty entirely. For properties valued between £300,001 and £500,000, 5% of the subsequent portion between these amounts will be payable at the time of purchase.

This therefore means that stamp duty liability will remain zero for most first-time buyers in England and Northern Ireland.

Competitive mortgage deals continue

Along with significant savings on stamp duty, highly competitive mortgage deals continue to motivate first-time buyers. Specifically, the widespread availability of 10% and 5% deposit mortgages is encouraging more prospective buyers to make their moves.

The number of 95% LTV products on the market has increased by more than 100% over the past two months. There are now approximately 192 5% mortgage products available on the High Street, up from just 80 in May.

Elsewhere, some lenders are offering fixed-rate mortgages with a 40% deposit requirement and interest rates as low as 1%. Interest rates on higher LTV mortgages are also lower than they have been in some time, but buyers unable to provide more than a 5% deposit are being heavily scrutinised with regard to their financial circumstances and credit history.