What Is A Stamp Duty Holiday?

In this article, stamp duty holidays will be talked about in-depth, explaining all you need to know with information relevant to 2024. 

How do stamp duty holidays work? And when is the next one planned? Stamp duty differs throughout the UK, and so do the holidays that go along with it. So, read on to learn more about the topic..

What does stamp duty holiday mean?

A Stamp Duty Holiday is a temporary break of tax paid under stamp duty. Stamp duty is the percentage of tax paid to the government on the purchase of a property. Stamp Duty is a type of tax applied to reduce the amount of money landlords can make from property appreciation.

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Typically, a stamp duty holiday completely excludes stamp duty tax or reduces it in staggering amounts. This happens as the price of property gets more expensive.

For example, someone who bought a £450,000 house in the July 2020 stamp duty holiday paid no stamp duty whereas a year before they would have to pay 5% at £22,500. This is a big difference when purchasing a property.

When was the stamp duty holiday introduced?

The last stamp duty holiday was introduced on the 1st of July 2021 to the 30th of September 2021. However, there have been a few stamp duty holidays throughout history. 

The most recent stamp duty holiday is now being called temporarily reduced rates by the government. More can be found about this information here. To sum it up, the initial 0% stamp duty rate originally introduced in 2020 was reduced.

This was reduced from the £500,000 property price threshold to £250,000. 

As of 2022, this holiday has been scrapped. Instead, it has been replaced with a reduced rate of stamp duty.

This reduced rate has been in place since the 23rd of September 2022. This on the other hand is not called a stamp duty holiday. It is simply just the government putting in measures for people to continue to buy property.

What are the SDLT rates for residential property today?

The Stamp Duty rates were last changed on September 2022. These are the most up-to-date rates which mostly affect the bands of property purchases on the lower end, getting rid of the 2% SDLT rate rate that was there before.

Property value SDLT Rate
Up to £250,000 0%
From £250,001 to £925,000 5%
From £925,001 to £1,500,000 10%
Over £1,500,000 12%

 

Why was the stamp duty holiday introduced?

The stamp duty holiday was introduced to increase the amount of property sales. While a lot of people would like to believe the holiday was in place because they wanted to help buyers.

The stamp duty holiday was actually introduced to kickstart the economy after the pandemic.

This encourages the purchasing of new homes for landlords looking for investments.

Also, for first-time buyers looking to find somewhere to live. The idea is the incentive of saving money would encourage buyers to buy now rather than later.

There were other similar schemes in place, unrelated to property too. For instance, a lot of people will remember the eat-out-to-help-out scheme. They all used government funding to encourage spending and allow businesses to start earning money again.

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Who will benefit from the stamp duty holiday?

The countries of England, Wales and Scotland all benefit from stamp duty holiday. In the original implementation of the stamp duty holiday, Wales and Scotland followed suit. This happened by these countries also reducing their stamp duty equivalents. These are Land & Buildings Transaction Tax in Scotland, and Land Transaction Tax in Wales.

In September 2022, the chancellor at the time who was Richi Sunak announced a change.

This change announced that there will be a reduction in stamp duty.

This will be for those in England and Northern Ireland spending money on homes priced £250,000 or less. Having said this, this is good for investors only as first-time buyers are exempt from stamp duty up to the first £300,000 anyway.

Property bought during a stamp duty holiday

How much could you have saved in the stamp duty holiday?

In the stamp duty holiday, the maximum amount someone buying a home could save would have been dependent on whether you bought a first or second home. For an accurate stamp duty calculator for your second home check out our website.

How does the Stamp Duty holiday work?

Stamp duty holidays work by making the original rates that stamp duty is paid tax-free or reduced. Over time, thoughts will mean the government collects less tax from homeowners as the private landlord pays less. This gives an incentive for buyers as their homes become cheaper.

Is the stamp duty holiday still running?

As of the 1st of October 2021, the stamp duty holiday in England and Northern Ireland ended. The rates for stamp duty went right back to the levels before the pandemic. However, these changes have been changed again and in September 2022, the first Stamp Duty threshold (0%) was doubled to £250,000.

This means a property that was bought between October the 1st 2021 and the 23rd of September 2022 between £125,000 and £250,000 used to pay 2% SDLT but now these rates are 0%.

On top of this, the thresholds for paying stamp duty for first-time buyers have been increased. A first-time buyer can now buy a house up to £425,000 in value without paying any stamp duty and a house up to £625,000 in value by just paying 5% in SDLT.

Is the stamp duty holiday going to be extended?

As of 2022, the stamp duty holiday is not extended. This is partly due to the government trying to reduce spending and the borrowing of money which will help to drive down inflation in the UK.

Once this period in the economy is over there could be an addition of the stamp duty holiday again. However, for the time being, the lates information available for home buyers was given on September 23rd 2022 here.

Will there be a stamp duty holiday in 2024?

In 2024, rather than providing relief from stamp duty, the government announced the elimination of stamp duty relief.

The Multiple Dwellings Relief, previously available for individuals purchasing multiple residential properties in a single transaction, has been abolished.

Was the stamp duty holiday for homebuyers?

Homebuyers do benefit a lot from the stamp duty holiday. Especially if they are first-time buyers. This is amongst the many other schemes that those in the UK have. You may have heard of other examples like the help to buy scheme for instance.

For those landlords seeing properties and the buying of a home as an investment, the stamp duty holidays also really helped them lock in good loan-to-value ratios for their mortgage into the future which allowed landlords to go for bigger deals because they’d pay less in tax.

How does the stamp duty holiday work for property sellers?

For the sellers of property, the stamp duty tax doesn’t have much effect directly. Having said this, the addition of the tax reduced demand for the purchase of property which drives down the price of properties in general.

This is something you need to look out for as a property owner as understanding the economic climate and what is going to drive up demand is a key piece of knowledge you need to learn in order to predict inflation, one of the two ways a landlord can make money from property investment.

Are buy-to-lets and second homes eligible for the stamp duty holiday?

Buy-to-lets are eligible for stamp duty and land tax and throughout the years, if anything, they have been taxed harder than other types of properties on different types of mortgages like residential mortgages to name an example.

Currently, in 2024, the rate at which a buyer pays stamp duty using a buy-to-let mortgage is as follows:

What are the 2024 Buy-To-Let Stamp Duty Rates?

Property value stamp duty rate
£0 – £40,000 0%
£40,001 – £250,000 3%
£250,001 – £925,000 8%
£925,001 – £1.5m 13%
£1.5million + 15%

 

Did the stamp duty holiday have an impact on house prices?

After the addition of the stamp duty holiday, house prices on average shot upwards. They were pushed up throughout the UK by a whopping 8.5%. This was after the original stamp duty holiday. This original holiday was put in place in June 2020 after the pandemic hit.

It is up for debate whether it was the absence of stamp duty that solely drove the cost of house prices up. Some say it could have been the fact that a lot of people were stuck inside their homes during the pandemic. Others say people were unable to process a mortgage with a lender.

Finally, in 2024, the UK housing market is showing signs of recovery in 2024 after a nearly two-year slump. Property sales have risen for seven consecutive months as of April, increasing by 12% annually.

This rebound can be attributed to lower mortgage rates and improved consumer confidence, providing prospective buyers with greater choices and affordability. The number of homes listed for sale has also increased by around 20% compared to the previous year, indicating a more active market and perhaps the stamp duty holiday influenced this over the years.

It is just hard to justify economically whether the stamp duty holiday was the main factor. Or it was a variety of factors that contributed to the increase in house prices. For more on this story click here.

The direct effect the stamp duty holiday had on residential mobility

When looking at the particular effect on the residential property market, there is a clear difference. Buyers responded to the stamp duty holiday in a different way compared to previous years.

First of all, there was an increase in residential property sales.

However, this increase wasn’t uniform across all the values of the housing market. Astonishingly, the band of the £500,001 – £925,000 property purchases increased by a great 47%.

When comparing this figure. The residential property market increased by just 19% (which is still well above average). So, it is clear that some values of the property remained more desirable. Especially to buy residentially.

In fact, buyers who originally would have bought a lower-value home now took advantage of the stamp duty holiday. They now bought higher-value homes and the sales of homes under £125,000 dropped by 29%.

When comparing the 19% increase in residential property sales to the average of an 8.5 % increase across all property.

It is reasonable to conclude the commercial property market took a massive hit. This is due to the lack of demand for office space. Companies realised they could allow people to work from home during the pandemic.

Following this, a lot of investors calculated stamp duty commercially. Converting commercial buildings into residential properties to match market demand.

How the stamp duty holiday affected behaviour

As we know, the introduction of the stamp duty holiday affected the number of property sales by quite a bit.

It increased sales dramatically. But where were all these new buyers heading?

A stamp duty holiday

Well, a whopping 61% of all sales of residential properties happened in London and the South East. And an even greater proportion in the southeast of England.

It is fair to conclude, buyers used the tax-free haven as an opportunity to move to London. This is always a popular choice but likewise a choice to move further away from the capital. Those moving towards the southeast will also be able to benefit from the quick commute to the city.

This is following the trend of people working from home and not minding a longer commute. Being on the outskirts of the capital. All while also having a more rural environment to live in away from a big city.

What are the views on the future of stamp duty holidays?

The view of any future stamp duty holidays are that the stamp duty holidays could bring back the buying frenzy the UK saw in the first place.

This happened in the aftermath of the pandemic. However, it is also important for the government to collect taxes. This ensures you invest back into the economy so it is not sustainable in the long term.

Also, while the implementation of the holiday is good for the economy. The scheme doesn’t really benefit those looking to use properties as an investment.  Stamp duty holidays in the UK have had an impact on the Uk market. In particular for those buying second homes and using buy-to-let mortgages.

What this means is after there is an initial mass buying in the property market.

Demand will level off as those looking to buy property frequently as an investment will have to wait. They will have to wait for the right economic period. Also, for other factors to fall into the place in order to buy a property.

Where do England and NI stand today as off today on stamp duty holidays?

In the UK and Northern Ireland, in 2024, the rates for stamp duty are almost where they were pre-pandemic.

This is with an exception for buyers purchasing homes with a lower value.

In 2022, homes up to £250,000 in value bought will have 0% stamp duty taken from them. Prior to June 2020, homes up to £125,000 would have 0% taken off of them. Finally, homes over this amount (up to £500,001) would pay a 2% stamp duty. In 2022, homes over £250,001 jump up to a 5% stamp duty. This removed the previous 2% band.

When looked at holistically, these recent stamp duty changes only really affect those buying cheap homes.

Most homes, especially in London are nowhere near that price. As well as this, cheaper homes have never contributed the most in tax under stamp duty anyway.

So with all things considered, these changes aren’t that beneficial for the UK population as a whole. The government will continue to collect a very similar amount of tax they were doing before. Yet, this is probably necessary as a result of the current bleak economic climate in the UK as of 2024.

A man who is on a stamp duty holiday

Stamp duty holidays in summary

The stamp duty holiday across the UK came and went and had a few large impacts. However, in recent times with the rise of interest rates, the fact that stamp duty has been slightly reduced doesn’t have much of an impact. 

Overall, the use of stamp duty holidays certainly has an impact on house prices.

As of 2024, there are no stamp duty holidays set for now or in the future. It is useful to keep the fact that there could be one in mind if you know you will be selling a property in the future.

FAQ

Will there be another stamp duty holiday 2024?

It is extremely unlikely there will be another stamp duty holiday again in 2024. This is because Stamp Duty encourages spending and increases inflation. In 2023 and 2024, there is an active effort to reduce spending as inflation is too high

Can you avoid stamp duty even though there is no holiday?

Even though there is no stamp duty, you can avoid stamp duty by gifting a property to a family member

Will there be a stamp duty holiday ever again?

There will likely be stamp duty holiday if there are low interest rates and the government wants to increase spending in the economy by boosting property sales

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donnell-bailey

Donnell Bailey

Property expert

Donnell is a property expert focusing on the property market, he looks at a combination of legislation, information from property managers, letting agents and market trends to produce information to help landlords.

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