6 things to make the most of before the end of the tax year

Whether you’re a first-time buyer, homeowner, or landlord, here are some initiatives and allowances you could benefit from before 5 April.

1. Stamp duty 

You could save up to £15,000 in tax if you buy a home before the stamp duty holiday ends on 31 March.

Chancellor Rishi Sunak raised the threshold at which stamp duty applies to £500,000 last July, meaning that nearly nine out of 10 transactions are no longer subject to stamp duty.

With many buyers rushing to beat the stamp duty deadline, the conveyancing process – in other words, the legal work associated with buying property - has got longer.

But there are ways to boost your chances of securing a quick sale, such as buying a new-build home direct from a house builder or bidding on property at auction. And there are steps you can take to help the conveyancing process go as smoothly as possible.

Normal stamp duty rates will apply after the deadline has passed. However, first-time buyers will still be exempt from stamp duty on the first £300,000 of a property purchase for homes costing up to £500,000 once the holiday ends.

It’s also worth noting that if you are currently living overseas and want to buy a property in England or Northern Ireland, you have until the end of the current tax year to beat a new stamp duty surcharge for non-residents.

From 1 April, all buyers who are not UK residents will have to pay additional stamp duty of 2% on the entire purchase price of their property.

As a result, if you are buying a £250,000 home you will have to pay an extra £5,000, on top of the basic stamp duty of £2,500, to give a total of £7,500.

2. Help to Buy equity loan scheme

The Help to Buy equity loan scheme in its current form enables you to buy a new-build home with just a 5% deposit, which the government tops up with a 20% five-year interest-free equity loan.

The initiative will close on 31 March and be replaced with a new version of the scheme, which will only be available to first-time buyers.

Regional price caps on the maximum value of properties that can be bought using the scheme are also being introduced.

3. Mortgage payment holidays

While you can benefit from deferring your mortgage payments until 31 July, lenders have warned that you must apply for one of the mortgage payment holidays before 31 March.

The scheme enables you to defer mortgage payments for up to six months, although if you are applying for your first holiday, now you will only be able to defer them for up to three months.

You will not have to pay anything during the payment holiday period, but interest will continue to accrue and will be added to the total amount you owe.

The mortgage payment holiday scheme, which had been due to end on 31 October 2020, was extended for a further six months as the UK continued to suffer economic fallout from the coronavirus pandemic.

4. ISA allowance

If you are saving for a housing deposit, make the most of your ISA allowance. You can save up to £20,000 in the current tax year and this can be split between different ISAs.

If you have a Lifetime ISA, which is aimed at first-time buyers and pension savers, you can save up to £4,000 into it each tax year.

The government contributes 25p for every £1 you save, meaning the maximum amount will earn you a tax-free bonus of £1,000.

5. Lifetime ISA charge relaxation

To help people who need to tap into their savings during the pandemic, the government reduced the withdrawal charge for money taken out of a Lifetime ISA from 25% to 20% between 6 March 2020 and 5 April 2021.

The tax-free savings accounts, which can be opened by people aged between 18 and 39, can be used to save for a deposit for a first home or for retirement.

The exit penalty for any withdrawals that are not used to buy a property or fund retirement will revert back to 25% after 5 April.

6. Capital gains allowance

If you’re selling a second home or investment property, you could be liable for capital gains tax, charged at a rate of 18% for basic rate taxpayers and 28% for higher rate ones on any gains made.

But everyone has an annual capital gains tax allowance, which for the 2020/21 tax year is £12,300, rising to £24,600 for assets that are jointly owned by a couple.

If you have sold a property during the past year, remember to offset any profits against this allowance.


Revealed: what the latest housing trends could mean for you

Eyeing a home move? Head of research, gives the lowdown on the housing market, from house prices to the stamp duty holiday.

Q. How are the first few weeks of the year shaping up?

A. It has been a fast start in the market in 2021. Demand for property after Christmas has rebounded even more quickly than at the start of 2020 as buyers try to beat the stamp duty holiday deadline.

Our data shows that demand for homes between Boxing Day and 17 January was running 13% higher than the same time a year ago, with the number of new sales agreed also up 8%. This trend is broadly uniform across all regions and countries.

Q. What impact is the third national lockdown having?

A. The third lockdown is exacerbating a supply/demand imbalance in housing.

Buyer demand continues to gather pace. But it is more than the stamp duty deadline motivating movers. While early January is typically one of the busiest times for new buyers, this year’s activity is compounded by the impact of the pandemic.

Successive lockdowns and restrictions mean that people have been spending more time at home, and this is making some homeowners reassess the space and location of their home. It has been the catalyst for a lot of movement.

At the same time, high numbers of Covid-19 cases and calls to uphold social distancing have prompted some sellers to press pause on opening their homes for viewings and listing their property for sale at present.

If sellers remain cautious and the supply of homes for sale scarce, the choice for buyers will be limited, which will continue to put upward pressure on prices.

We expect the sellers currently putting sales on hold to continue with their sale as  Covid-19 case numbers start to fall sharply or we move back to regional tier-based restrictions.

Q. So pandemic-led restrictions are making some sellers reluctant to list their homes for sale. Are there any areas that are bucking this trend and why?

A. We’ve seen a rise in the supply of homes for sale in London. This is likely driven by some flat-owners looking to move into more spacious homes or move further out of the city.

Also, there could be some rental properties being sold as landlords keep an eye on any potential tax changes around capital gains tax (CGT) for investors. These have not been announced or signalled by Chancellor Rishi Sunak, but the Office of Tax Simplification has recommended to Sunak that the rules should change.

This could create more choice for buyers. Yet, even with this rise in supply in London, prices are continuing to climb, up 3.1% in 2020.

Q. At a UK-wide level, house prices are continuing to rise. Where are the hottest local markets?

A. Despite the third lockdown, UK house prices are close to a four-year high of 4.3%, the highest level since April 2017. Momentum for this is coming from Wales, northern England and Scotland, where demand is strong and affordability levels are higher.

House price growth has now hit a 10-year high in three regions: north east, north west and Yorkshire & Humber, with prices currently ranging between 3.7% and 5.4% year-on-year.

At a country level, Wales is the fastest-growing housing market, with annual prices up 5.4%. And at a city level, Liverpool has experienced its fastest rate of growth for 15 years – since well before the global financial crisis.

While house prices have increased in southern regions too, affordability pressures are limiting above-average growth.

Q. The stamp duty deadline is just months away now. What does this mean for buyers and sellers?

A. There’s a lot of focus on the deadline. With more sales in the pipeline than previous years, the average time it takes from agreeing a sale to completing it is approaching four months – up by two weeks.

We estimate that up to 70,000 sales agreed in 2020 may miss the deadline. There may be a case for a short, month-long extension to help buyers get their purchase over the line. A petition calling for an extension gathered enough signatures for it to be debated by MPs recently.

At present, we expect around half the sales agreed in January will meet the deadline.

As ever with the end of a stamp duty holiday, there may be a slowdown in activity immediately after the tax break window ends, but we do expect activity to continue, with total transactions this year matching those seen in 2020.

Thank you.


Nearly 750,000 buyers benefit from stamp duty holiday

People buying a home with a price tag of up to £500,000 have saved an average of £4,660 each as a result of the stamp duty holiday.

Nearly 750,000 homebuyers in England are set to benefit from the stamp duty holiday, collectively saving almost £5bn.

A total of 600,000 buyers who agreed a sale from May 2020 onwards will not pay any stamp duty at all as a result of the stamp duty holiday.

They will save an average of £4,660 each, or £2.8bn collectively, assuming they complete before the 31 March deadline.

A further 140,500 people buying homes costing more than £500,000 will benefit from a reduction in the amount of stamp duty they pay, according to our analysis.

And they will save £15,000 each, or £2.1bn in total, although they will still have to pay the tax on the portion of their property’s value above £500,000.

Why is this happening?

The stamp duty holiday on homes costing up to £500,000 was launched by the Chancellor in July last year to help boost the housing market after the first national lockdown was lifted.

The tax break, combined with many people carrying out a once-in-a-lifetime re-assessment of their housing needs, triggered a boom in property sales, with 11% more homes changing hands in 2020 than in 2019.

Who does it affect?

Stamp duty is paid on completion - in other words, when ownership is legally transferred.

So the stamp duty holiday not only benefitted people who were already in the process of buying a home when the tax break was announced, it has also acted as an incentive for other potential buyers to move home before 31 March deadline.

The spike in buyer appetite triggered in part by the stamp duty holiday has encouraged some people to put their homes up for sale - many buyers are sellers, too.

This combination of sustained buyer demand and more homes on the market has boosted overall activity levels.

Can I still benefit from the stamp duty holiday?

Under normal circumstances, anyone who agreed a sale during any calendar year would expect to have completed on it by the end of March the following year.

But a ‘bulge’ in the sales pipeline has meant that the average time it takes from a sale being agreed to legal completion is now approaching four months.

As a result, up to 70,000 property sales that were agreed in 2020 are at risk of missing the 31 March deadline to benefit from the stamp duty holiday. Calls are now growing for the stamp duty holiday to be extended.

However, there are ways to boost your chances of securing a quick sale, such as snapping up a new-build home direct from a house builder or buying a property via an auctioneer, such as iamsold.

What can I do to speed up my transaction?

If you are in the process of buying a home, there are a number of steps you can take to help the conveyancing process go as smoothly as possible.

Make sure you have all the relevant paperwork you will need to hand and respond to any requests for additional information as quickly as possible.

 

If you need to sign documents and return them to your solicitor, consider delivering them by hand, rather than relying on the post or even a courier.

Maintain a high level of communication with your solicitor and estate agent to try to keep the process on track. It can be a good idea to agree to have a weekly update from all parties.

Finally, be prepared to be flexible. If you are also selling a property and an issue is uncovered in the buyer’s survey, you may have to be prepared to drop your agreed sale price slightly to keep things moving along.

 

Research director said: “Demand for housing has started 2021 as strongly as last year with limited evidence new buyers are being put off by the proposed ending of the stamp holiday.

“The pandemic and lockdowns continue to stimulate households to move home and this will help soften the short-term impact when the stamp duty holiday finally ends.”

Top three takeaways

  • A total of 600,000 buyers will not pay any stamp duty at all as a result of the tax break, saving an average of £4,660 each
  • A further 140,500 people buying homes costing more than £500,000 will see a reduction in the amount of stamp duty they pay, saving them £15,000 each
  • An estimated 70,000 sales that were agreed in 2020 are at risk of not completing in time to benefit from the stamp duty holiday.

Revealed: where family homes have seen the biggest jump in value

Searching for a home with more space? Find out how three to five-bedroom houses are performing in different areas.

Family homes in the Midlands have seen the biggest jump in value during the past four years.

The East Midlands ranks in first place, with the price per sq ft of a family home in the region increasing by 25.4%, or £43, since 2016 to stand at £212.

Meanwhile, the West Midlands comes in second place. The price per sq ft of a family home, defined as a three to five-bedroom house, has risen by 24.6% to £223, according to our data.

Price per sq ft measures the ratio between property value and size. In other words, it offers a base line for comparing the cost of homes without having to make adjustments for the different sizes of properties.

Wales comes in third, with a 23.6% hike in prices per sq ft, followed by those in the east of England and the north west, with gains of 21.4% and 21.3% respectively.

The cost of a three to five-bedroom house has increased by 20.8% in the past four years in the south west, 20.3% in Yorkshire and the Humber, and 16.7% in the south east.

London, which comes in ninth place, saw the biggest increase in values per sq ft in monetary terms, with a jump of £71 to an average of £558. However, in percentage terms the rise was only 14.6%.

Scotland and the north east saw the lowest gains in property values on a per sq ft basis, at 14.5% and 9.6% respectively.

Which local authorities saw the highest growth?

At a local authority level, Merthyr Tydfil, just south of the Brecon Beacons National Park in Wales, saw the biggest increase in prices per sq ft, with a jump of 38.2%, or £34, during the past four years to leave the average family home there costing £123 per sq ft.

The Forest of Dean, in the south west, was not far behind with a 37.9%, or £64, rise in prices per sq ft to £233, followed by Tameside in the north west at 35.9%, or £52, to £197.

Nottingham and Birmingham completed the top five, with house prices per sq ft rising by 34.8% and 34.1% respectively during the period.

Overall, six of the local authorities that saw the biggest price increases were in the East and West Midlands.

What's the background?

The coronavirus pandemic is prompting many people to carry out a once-in-a-lifetime re-evaluation of their housing needs.

Successive lockdowns, combined with an increase in people working from home, is driving people to look for homes with more space. And demand for family houses with gardens, parking and extra space to work has intensified.

Our research shows people who are looking for more space, such as those with growing families, how three to five-bedroom houses are performing in terms of value.