Everyone loves a holiday and especially one that involves the word ‘tax’. That’s
why many potential home buyers in England and Northern Ireland are
suddenly eager to take advantage of the government’s stamp duty tax holiday,
which went into effect on October 5 th , 2020. But it’s best not to drag your feet
as this holiday ends on March 31, 2021.
According Chancellor Rishi Sunak, this exemption from the stamp duty land tax
(SDLT), often simply referred to as the stamp duty, could benefit the general
first-time home purchaser by saving them up to £2,000 on homes valued up to
£500,000 pounds. But make sure you get all the facts before you take this
holiday.
Homebuyer beware… and polish your negotiating skills
Back in 2008 a similar stamp duty tax holiday scheme was launched and it was
discovered that when homeowners got wind of the tax holiday scheme, they
tended to keep their selling prices at a higher rate. This is because they knew
that potential buyers, who normally pay the stamp duty, would now have
some extra money in their pockets. That’s why it’s important to hone your
negotiating skills to get the best possible home price. Ultimately, you will
probably find yourself splitting the cost of the stamp duty with the home
owner. But even in this circumstance you could still save a significant amount
of money.
Not such a happy holiday for second-home purchasers
While the stamp duty holiday is expected to serve as an incentive for expanded
home buying among those trying to enter the market for the first time during
the current Covid-19 pandemic, those setting their sights on a second home to
let will be disappointed. You’ll still have pay stamp duties of between 3 and
15% of a home’s value depending on the overall price.
Stamp duty bands for £500k homes and above
If you’re aiming to purchase a home in the tonier price ranges between
£500,000 and £925,000 during the tax holiday period, the 2% stamp duty band
disappears, and instead immediately kicks in at 5%, and reaches 10% for
homes costing £1.5 million. Anything above this amount and you’ll be looking
at an even higher rate of 12%.
Stamp tax holiday sparking home purchase interest from foreigners
One interesting development to arise from the tax holiday decree in recent
weeks is the sharp spike in interest for UK home purchases from overseas
buyers, in particular, the Hong Kong Chinese.
According to one sales director at Hong Kong-based Platinum Rise Real Estate-
“We have recently received approximately 25 per cent more inquiries than
normal.” He added that a host of counties maintain significantly higher home
purchase cost burdens than the UK, including Singapore, Hong Kong, Canada
and Australia.
So, if you had your eye on a property below a half million pounds, now might
be the best time to make your move. Because, like a week or two in Spain
during summer… holidays don’t last forever.