With the stamp duty holiday now extended, our guide explains how you could still benefit from the tax cut.

The Chancellor Rishi Sunak unveiled a stamp duty holiday last July in a bid to boost the housing market after the first national lockdown.

He raised the threshold at which buyers start paying stamp duty with immediate effect, from £125,000 to £500,000, in England and Northern Ireland. 

It means that nearly nine out of 10 transactions are no longer subject to stamp duty, with the average bill falling by £4,500. 

The stamp duty holiday was set to run until 31 March 2021. But in the Budget this week, the Chancellor moved the deadline until the end of June, giving buyers more time to take advantage of the tax break.

And to avoid a ‘cliff edge’ when this period ends, the tax-free threshold will then drop to £250,000 for a further three months until 30 September. Normal stamp duty rates will resume on 1 October.

Here’s our guide with more detail on what exactly the stamp duty holiday is - and how you could benefit from it.

First of all, what is stamp duty?

Under normal circumstances, buyers must pay stamp duty when buying a home or a piece of land worth £125,000 or more in England and Northern Ireland.

It is charged on a tiered basis (so you only pay the higher rates on the slice above any threshold – the same as income tax). 

These are the rates:

  • Up to £125,000: 0%
  • On the portion from £125,001 to £250,000: 2%
  • On the portion from £250,001 to £925,000: 5%
  • On the portion from £925,000 to £1.5m: 10%
  • Above £1.5m: 12%

There are exemptions available for first-time buyers, who don’t have to pay stamp duty on the first £300,000, so long as the home doesn’t cost more than £500,000. 

Meanwhile, people buying additional property for £40,000 or more, such as second homes, pay an extra 3% of stamp duty on top of regular stamp duty rates. The surcharge effectively works as a slab tax. In other words, the 3% loading applies to the entire purchase price of the property.

There’s also an additional 2% stamp duty levy set to be imposed on non-UK residents who buy property in England and Northern Ireland from April 2021.

Find out more in our guide on stamp duty and how to calculate it.

So how does the stamp duty holiday work?

Sunak’s stamp duty holiday means that buyers only start to pay stamp duty on property above £500,000 in England and Northern Ireland. 

This is for people buying their first home or moving up or down the housing ladder.

These are the holiday rates:

  • Up to £500,000: 0%
  • On the portion from £500,001 to £925,000: 5%
  • On the portion from £925,001 to £1.5m: 10%
  • Above £1.5m: 12%

The 3% stamp duty surcharge applies on top of the holiday rates, so people buying additional homes attract a 3% stamp duty bill on the first £500,000 of property. 

This still results in a saving, because the 3% rate previously applied on the first £125,000, with higher rates above that.

We’ve drawn up a handy interactive table to reveal just how much buyers could save. 

It’s worth remembering that the tax-free threshold announced at the the Budget this week will be cut from £500,000 to £250,000 on housing sales that complete between 1 July until 30 September.

The threshold for the nil rate band will then fall back to its usual level of £125,000 on 1 October.

Similar ‘holidays’ were introduced last year in Scotland and Wales, where the property tax is different.

The Scottish government increased the threshold of its Land and Buildings Transaction Tax (LBTT) from £145,000 to £250,000. It is set to end on 31 March.

And the Welsh government raised the threshold of its Land Transaction Tax (LTT) from £180,000 also to £250,000. The holiday has now been extended from 31 March until 30 June. However, it will not be ‘tapered’ off.

Why has the stamp duty holiday been extended?

The stamp duty holiday, combined with many people reassessing their homes and lifestyles during the pandemic, prompted a jump in housing transactions.

It led to a congested sales pipeline and the home buying process taking longer than usual. The average time it takes from a sale being agreed to completion – when ownership legally changes hands – is now approaching four months.

As a result, around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline, according to our research.

And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.

What could the stamp duty holiday mean for you?

‘Hundreds of thousands’ of buyers who have already agreed a sale with little or no expectation of making stamp duty savings will benefit from the Chancellor’s three-month extension to the main stamp duty holiday, according to Richard Donnell, research director at Zoopla.

He explained: "Buyers who are now looking for a new home could benefit from the full savings of up to £15,000 if they complete their sale within less than four months.

"But all buyers who enter the market within the next three months are very likely to benefit from savings of up to £2,500 if they complete by the end of September."

Home buyers in London and the south east typically benefit the most from a stamp duty holiday because higher average prices in these regions translate into the biggest savings of up to £15,000. 

Donell added: "Some 234,000 sales have been agreed since mid-December, with one in five of these transactions in the south east of England.

"Buyers in the south east will make savings of £271m. Total savings across the country, allowing for four months between sale agreed and completion, is around £987m."

And while the stamp duty holiday means significant savings for some buyers, others will see no change. For example, first-time buyers purchasing a home in England or Northern Ireland for up to £300,000 have been exempt from this property tax since 2017.

Tell me a bit about the background of stamp duty

The government introduced historic reforms to stamp duty in 2014. It saw the method of calculating the tax change - as well as the rates (Scotland followed with changes in 2015). 

This effectively cut the tax bill on homes worth up to £940,000 (which account for more than 95% of households) but cranked up the charges for more expensive properties.

In 2009, the most expensive stamp duty band was 4%. This is now 12%, rising to 17% for overseas buyers purchasing in England from April. 

This map shows stamp duty charges under normal circumstances: 

How Zoopla can help you

Explore a wide range of properties for sale on Zoopla, from new-build homes to period properties, studio flats to spacious family homes.

Use our handy tools to help you find exactly what you want. Take our Advanced Search tool - it allows you to discover homes with specific features, such as 'thatched roof' or 'bifold doors'. 

Register with Zoopla to get instant email alerts for your preferred types of property - you can save as many searches as you want. 

And if you need any help decoding property jargon, don't forget to check out our jargon-buster.

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 The information and data in this article was correct at the time of publishing and every attempt is made to ensure its accuracy. However, it may now be out of date or superseded. Zoopla Ltd and its group companies make no representation or warranty of any kind regarding the content of this article and accept no responsibility or liability for any decisions made by the reader based on the information and/or data shown here.
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