Buyer demand soars as stamp duty holiday is extended

But the supply of homes for sale remains tight, pushing prices higher.

Buyer demand spiked by 24% in the week following the Budget as people scrambled to take advantage of the stamp duty holiday extension.

Overall demand was also 80% higher in that same week compared to the same time period over the previous four years, due to a combination of the tax break and the ‘search for space’ triggered by the Covid-19 pandemic.

But the supply of new homes coming on to the market remains constrained, putting further upward pressure on prices, according to our latest House Price Index.

These factors contributed to annual house price inflation of 4.1% in February, more than double the rate of 1.8% recorded in the same month of 2020.

How busy is the housing market?

The Budget announcement that the stamp duty holiday on homes costing up to £500,000 will be extended until 30 June, with a tax-free threshold of £250,000 in place for a further three months, has triggered a fresh wave of interest among potential buyers.

The number of sales agreed is 5.3% higher than it was a year ago, while the average time it takes to sell a property, excluding London, has fallen by nearly a week to just 44 days.

But while buyer demand is 80% higher than the long-run average, the supply of homes being put on the market has actually fallen by 13%, compared with the same period of 2020.

That said, the volume of homes for sale is expected to start to recover as the Covid-19 vaccine programme continues to gather pace and lockdown restrictions are lifted.

What’s happening to house prices?

Unsurprisingly, the mismatch between supply and demand is continuing to drive house prices higher.

The typical value of a home is now 4.1% higher than at the start of the first national lockdown in 2020, with prices rising by an average of £8,907 during the past year or £750 a month.

February marked the fourth consecutive month during which house price growth was above 4%, matching levels last seen in the summer of 2017.

Wales has seen the strongest gains during the past year at 5.7%, followed by the North West at 5.4% and Yorkshire and Humber at 5.2%.

Meanwhile, house price growth in the Midlands, North of England, Wales and Scotland is at an almost 10-year high, fuelled by the relative affordability of these markets.

Growth is slowest in southern regions, where affordability has become increasingly stretched, with prices rising by only 2.3% in London, 3.3% in the South East and 3.5% in the East of England.

Northern cities also continued to outperform their southern counterparts.

Manchester led the way with year-on-year price increases of 6.6%, followed by Liverpool at 6.4% and Leeds at 5.4%.

At the other end of the scale, prices edged ahead by just over 2% in Cambridge, Oxford and Southampton, while Aberdeen, where the property market has been struggling for some time due to the low oil price, saw property values drop by 1.3%.

What could this mean for you?

The jump in demand, which is feeding through into faster selling times, is good news for anyone with a property to sell.

But sellers who are also looking to move up the property ladder are likely to find themselves facing increased competition for their next home.

This is likely to particularly be the case for people in northern regions, where the property market is hottest, and those looking for houses, rather than flats.

Our data also points to an increase in demand among first-time buyers following the Budget announcement about the new 95% mortgage guarantee scheme, which launches on 1 April.

The share of mortgages taken out by first-time buyers fell in 2020 as lenders withdrew loans for people with small deposits, so if you are planning to take your first step on the property ladder this year, you can expect to face more competition for entry level properties.

What’s the outlook?

People’s reassessment of their homes in the light of the pandemic looks set to continue, as homeowners look for more space both inside and outside of their property.

As lockdowns start to ease, more homes should come on to the market, as sellers feel more comfortable about inviting potential buyers into their home, further driving market activity.

Head of research said: “The prospects for the housing market over the next year have improved on the back of the Budget. The continued search for space, the stamp duty extension and mortgage guarantees will support activity levels and headline house price growth up to the end of Q2 2021.

“Yet the pathway out of the lockdown, and the route to a full re-opening of the economy and unwinding of support measures, is unlikely to be simple or smooth.

“We still expect house price growth to moderate later in the year, but overall transactions are set to benefit from an additional boost following the stamp duty extension and tapering.”

Top three takeaways

  • Buyer demand spiked by 24% in the week following the Budget as people scrambled to take advantage of the stamp duty holiday extension

  • But the supply of new homes being put up for sale remains constrained putting further upward pressure on prices

  • At a national level, house price growth stood at 4.1% in February, more than double the rate of 1.8% recorded in the same month of 2020


Eviction ban extended again in England

With the country still in lockdown, the government has extended the ban on evicting tenants from their homes until the end of May.

A ban on landlords evicting their tenants has been extended until 31 May for people living in England.

Under the ban, bailiff-enforced evictions will not be allowed except in the most serious circumstances, such as cases of fraud or domestic abuse.

The requirement for landlords to give their tenants a six-month notice period before they can evict them has also been extended until the end of May.

The government said the extension would ensure tenants in both the private and social rental sectors could stay in their homes and have enough time to find alternative accommodation as the UK comes out of lockdown.

The eviction ban was first introduced last March as part of emergency legislation to help people whose finances had been impacted by the coronavirus pandemic. The ban has been extended several times, and the current one was due to expire on 31 March.

The government said it would consider the best approach to moving away from emergency protections at the beginning of June.

Who does it affect?

The move is good news for tenants who are struggling to pay their rent as a result of the pandemic and its associated lockdown measures.

Many workers from sectors that have been hit hardest by the pandemic rent their home, with 49% of hospitality workers and 36% of retail ones living in rental homes, according to government figures.

A free mediation service has also been set up to help landlords and tenants resolve disputes without having to go to court, in a bid to help more people stay in their homes.

Despite these measures, the ban on tenant evictions has been criticised as being less generous for tenants than the mortgage payment holiday is for homeowners.

The mortgage payment holiday enables homeowners to suspend payments for up to six months. While the eviction ban means tenants do not lose their home, it does not offer them any breathing space on their rent.

What should you do if you can’t pay your rent?

If you are struggling to pay your rent, it is important to contact your landlord as soon as possible.

Landlords with buy-to-let mortgages are included in the mortgage payment holiday scheme, on the understanding that they will pass on the benefit to tenants.

But people who have not yet applied for a payment holiday must do so soon as the scheme ends on 31 July.

It is worth checking to see if you are eligible for any government benefits, such as the universal credit, if your income has fallen.

You may also be able to get a Discretionary Housing Payment from your local authority, after the government made £180m available to councils to support renters with housing costs.

If you can still afford to pay some of your rent, it is worth asking your landlord if they would accept a reduced payment for a set period of time, particularly if you think you will be able to make up the shortfall once lockdown is lifted.

What are your rights as a tenant?

It is illegal for your landlord to evict you without giving you written notice or obtaining a court order.

If you are in an assured shorthold tenancy, the most common type of tenancy, they can start the eviction procedure through giving you either a section 21 or section 8 notice.

Your landlord does not need to give a reason to evict you under a section 21 notice, but they must give you a warning period. This period was previously two months, but it has been extended to six months because of the pandemic.

If you do not leave the property at the end of this period, your landlord must go to court to evict you legally.

You cannot be issued with a section 21 notice during the first four months of your original contract.

Landlords can only issue a section 8 notice if they have legal grounds to end your tenancy, for example if you are in rent arrears. They must apply to a court for a possession order to evict you.

Prior to the eviction ban, the notice period varied, depending on the grounds for possession.

Landlords are not allowed to harass you or lock you out of your home, even temporarily, while they are waiting to evict you.

Read our guide for more on your rights as a tenant.

What measures are in place in Wales, Scotland and Northern Ireland?

Wales

Landlords in Wales currently have to give their tenants six months’ notice if they are going to evict them, up from a normal notice period of two months.

Scotland

Scotland has also passed an emergency law due to coronavirus under which tenants must be given six months’ notice, except under certain circumstances, such as cases of criminal or anti-social behaviour or if the landlord or their family need to move into the property.

Northern Ireland

In Northern Ireland, landlords must give tenants 12 weeks’ notice, up from 28 days’ notice under normal circumstances, before applying for a court order to have them evicted.

Explore a wide range of properties for rent . Take our Advanced Search tool - it allows you to search for homes with specific features, such as 'garden'. 

Top three takeaways

  • A ban on landlords evicting their tenants has been extended until 31 May for people living in England
  • Under the ban, bailiff-enforced evictions will not be allowed except in the most serious circumstances
  • The requirement for landlords to give their tenants a six-month notice period before they can evict them has also been extended until the end of May

Why are some landlords selling up?

Latest House Price Index explores why the proportion of previously rented properties being listed for sale is starting to rise.

A number of landlords are exiting the private rental sector in response to changing market dynamics.

The proportion of homes for sale that were previously rented has been on a steady upward trajectory in all regions of England and Wales during the past year.

The trend has been most pronounced in London, where 13% of homes being marketed for sale in the last three months of 2020 were previously rented, while it is also strong in the south east.

Why is this happening?

On the one hand, landlords may simply be selling properties to crystallise gains following recent strong house price growth.

At the same time, some may have been prompted to sell up following speculation that capital gains tax rates were set to be increased in the Budget, although when the Chancellor delivered his statement he only announced that the threshold at which the tax kicks in would be frozen until April 2026.

Landlords’ decision could also be in response to changes to demand in the rental sector as a result of the pandemic, with renters favouring the suburbs and more rural locations.

Finally, buy-to-let investors have been hit by a raft of tax and regulatory changes in recent years, which may have acted as a catalyst for many to sell their less profitable properties.

Gráinne Gilmore, head of research, said: "One area of the market where there is more supply coming is among landlords who are bringing their investment properties forward for sale.

"The share of homes listed for sale which were previously rented has risen in nearly every region during 2020, as landlords reassess their portfolios in light of current rental trends, or ahead of possible tax changes for investment property.

"While the homes for sale account for a very small proportion (less than 1%) of rented stock, it is a noticeable trend emerging in the market."

What’s the background?

The pandemic, with its associated lockdowns and shift to working from home, has driven a significant change in demand in the rental market.

There has been a fall in tenants looking for homes to rent in cities, leading to a slight softening in rents in these locations, with London particularly impacted.

By contrast, demand for homes to rent has risen in commuter zones and well-connected towns, pushing rents higher.

Tenants are also looking for more space, and while overall demand has risen by 21% during the past year, houses are letting 30% quicker than they were 12 months ago.

Top three takeaways

  • A number of landlords are exiting the private rental sector in response to changing market dynamics
  • The proportion of homes for sale that were previously rented has been on a steady upward trajectory in all regions of England and Wales during the past year
  • The trend has been most pronounced in London, where 13% of homes being marketed for sale in the past three months of 2020 were previously rented

Stamp duty holiday explainer

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.

And the Welsh government raised the threshold of its Land Transaction Tax (LTT) from £180,000 also to £250,000.

They are both set to end on 31 March.

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.


4 key housing takeaways from the Budget

From the stamp duty holiday extension to the new 95% mortgage guarantee scheme, here’s how Chancellor Rishi Sunak’s announcements in the Budget could impact you.

1. Stamp duty holiday extension

Chancellor Rishi Sunak has extended the stamp duty holiday by three months.

The threshold at which buyers start paying stamp duty was temporarily raised from £125,000 to £500,000, in England and Northern Ireland, last July. The deadline has now been moved from the end of March until 30 June.

And to avoid a ‘cliff edge’ when this period ends, the tax-free threshold will then drop from £500,000 to £250,000 for a further three months until 30 September.

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

Read our stamp duty holiday explainer and our guide on regular stamp duty and how it's calculated for more details.

Who does it affect?

The move is great news for people in England and Northern Ireland who are either already in the process of buying a home and were in danger of missing the previous deadline of 31 March, or are planning to purchase a property in the immediate future.

The extension of the stamp duty holiday means buyers will save an average of £4,500 each and a maximum of £15,000 if they complete their property purchase – legally transferring ownership – within less than four months.

Meanwhile, those who finalise a property purchase between 1 July and 30 September will be able to save up to £2,500 each.

Richard Donnell, research director at Zoopla, said: "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.

"The tapering move by the Chancellor means that nearly half of sales in England will be free of stamp duty. Last year, some 46% of all home sales were for properties of up to £250,000."

2. 95% mortgage guarantee scheme

A new mortgage guarantee scheme has been unveiled to help people buy a property with a deposit of just 5%.

The initiative, which will be available from April, will operate in a similar way to the previous Help to Buy mortgage guarantee scheme, with lenders able to purchase insurance from the government to cover some of their losses if the property is repossessed.

The scheme aims to increase the availability of 95% loan-to-value (LTV) mortgages through reducing the amount of risk lenders have to take on.

There are currently just a handful of these deals on offer, with the majority only available to people who meet certain criteria.

Borrowers using the new guarantee scheme will have the opportunity to take out a fixed rate mortgage for five-years if they want to.

A number of lenders, including Lloyds, NatWest, Santander, Barclays and HSBC, have already signed up to the scheme.

The initiative, which comes after Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” at the Conservative party conference in October last year, will run until December 2022, by which time it is hoped the availability of 95% LTV mortgages will have recovered.

Who does it affect?

Unlike the Help to Buy equity loan scheme, the new mortgage guarantee scheme will be available to both first-time buyers and existing homeowners, including those trying to remortgage with low levels of equity in their property.

Buyers will also be able to use it to purchase any type of property, not just a new-build home.

The only restriction is that the property cannot cost more than £600,000 and it must be your main home, not a buy-to-let property or second home.

Donnell explained: "Supporting buyers with small deposits is key to widening access to home ownership for a part of the mortgage market that has been under-served.

"Our analysis shows the scheme will have the greatest benefits for buyers in lower value housing markets in northern England and Scotland where a 95% mortgage is more attainable.

"The scheme will have less impact for buyers in southern England where high house prices are a major barrier to being able to afford a 95% mortgage."

3. Tax thresholds frozen

A number of tax thresholds, including those for capital gains tax (CGT) and inheritance tax, will be frozen until April 2026.

The CGT threshold will be held at £12,300 for the 2021/22 tax year, while the inheritance tax one will remain at £325,000.

Who does it affect?

The move to freeze CGT means anyone selling an investment property or a second home will have to pay capital gains tax of 28% on any increase in the property’s value since they first bought it above £12,300.

Couples who jointly own a property can combine their CGT allowance to £24,600.

Inheritance tax is paid at 40% on all assets worth more than £325,000 that are not left to a spouse or civil partner, although this threshold increases to £500,000 if you leave your home to your children or grandchildren.

If you are married or in a civil partnership, and your estate is worth less than the threshold, you can transfer the difference between the value of what you leave behind and the threshold to your partner.

The freezing of the thresholds for these two taxes at a time of strong house price growth means more people will be liable for them and will face larger tax bills.

Donnell said: "Speculation over a hike in capital gains tax has already forced some landlords to act and we have seen a spike in the flow of homes for sale that were previously rented."

Our guide gives the lowdown on your tax liabilities as a landlord.

4. Extension of the furlough scheme

The furlough scheme will be extended until the end of September.

Employees covered by the scheme will continue to receive 80% of their salary for hours not worked, although their employers will have to make a contribution towards this in August and September.

Government support for people who are self-employed will also continue until the end of September through two grants equivalent to 80% of three months’ average trading profits, capped at £7,500.

Who does it affect?

The extension of financial support for people whose jobs have been impacted by the pandemic is good news for the housing market in general.

If property owners with a mortgage continue to receive a regular income despite not being able to work their usual hours, it makes it less likely that they will fall into mortgage arrears and have their home repossessed.

High numbers of forced sales as a result of arrears and repossessions typically lead to house price falls, so preventing people from losing their homes should help to support property values.


Stamp duty holiday extension confirmed: everything you need to know

The Chancellor has extended the stamp duty holiday until the end of June. It will then be tapered off for a further three months. Here’s what it could mean for you.

Chancellor Rishi Sunak has announced the stamp duty holiday will be extended for a further three months until the end of June.

The extension, which will apply to all buyers, means people in England and Northern Ireland will not have to pay stamp duty on the first £500,000 of property if they complete – in other words, legally transfer ownership – before June 30.

To avoid a ‘cliff edge’ at the end of this period, stamp duty will not be charged on the first £250,000 of a property purchase between 1 July and 30 September.

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

The extension of the holiday means nine out of 10 people buying a property will not have to pay stamp duty, saving them an average of £4,500 each and a maximum of £15,000 for those purchasing a home costing £500,000.

Richard Donnell, research director at Zoopla said: "The stamp duty extension to June means a further 234,000 buyers who have already agreed a sale will save an estimated £987m on stamp duty.

"And those who agree a sale from now will be guaranteed savings of up to £2,500 as long as they complete before the end of September.

"This will take 46% of homes out of stamp duty until the end of September. This removes a major cost from moving home that hits hardest in southern England where the mortgage guarantee is less effective.”

Why has the stamp duty holiday been extended?

The Chancellor announced the stamp duty holiday in July 2020 to help kickstart the housing market in England and Northern Ireland following the first national lockdown.

The tax break, combined with many people carrying out a ‘once-in-a-lifetime’ re-assessment of their housing needs in the face of the pandemic, triggered a mini home buying boom.

But the steep spike in housing transactions led to a congested sales pipeline and the home buying process taking longer than usual.

We estimated that around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline.

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.

Can you still buy a home before the stamp duty holiday ends?

Yes, 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.

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 housing market within the following months are very likely to save up to £2,500 if they finalise their purchase by the end of September.

Donnell explained: "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."

If you're looking to take advantage of the stamp duty holiday, you'll need to have your ducks in a row well before it ends.

The time it takes between agreeing a sale and completing is normally around 90 days.

But our research shows that the average time for a sale to cross the line is now just under four months – around a fortnight longer than normal.

What happens when the stamp duty holiday ends?

Once the stamp duty holiday ends on 30 June, there will be an interim period until 30 September when the tax-free threshold will fall to £250,000.

The tapering move means that nearly half of housing sales in England will be free of stamp duty. Last year, some 46% of all home sales were for properties of up to £250,000.

What are the stamp duty thresholds from 1 October 2021?

The former stamp duty rules will apply from 1 October. This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property.

Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.

For existing homeowners, the rates are:

  • 0% up to £125,000
  • 2% on £125,001 - £250,000
  • 5% on £250,001 - £925,000
  • 10% on £925,001 - £1.5m
  • 12% on any value above £1.5m

For example, if you buy a flat for £275,000, the stamp duty you owe would be:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the final £25,000 = £1,250

Total stamp duty = £3,750

Read our guide to find out more about stamp duty and how it's calculated.

Landlords and second-home owners

For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply.

However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%.

It is also possible under some circumstances to claim multiple dwellings relief.

Dig into the detail in our Q&A on the 3% surcharge.

Non-UK residents

From April 2021, an additional 2% stamp duty levy will be imposed on non-UK residents who buy property in England and Northern Ireland.

It means that international buyers of second homes could pay up to 17% tax on expensive properties.

The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.

First-time buyers

First-time buyers are exempt from paying regular stamp duty on properties costing up to £300,000 and pay 5% on the value of a property between £300,000 and £500,000.

A first-time buyer will pay:

  • 0% on the first £300,000
  • 5% on the remainder up to £500,000

So a first-time buyer purchasing a £275,000 flat would pay no stamp duty.

For a house costing £475,000, a first-time buyer would pay:

  • 0% on the first £300,000 = £0
  • 5% on the final £175,000 = £8,750

Total stamp duty = £8,750

However, if the purchase price is more than £500,000, first-time buyers cannot claim the relief and must pay the standard rates.

For example, a property purchased at £700,000 would result in a stamp duty bill totalling £25,000 even for a first-time buyer.

Stamp duty relief was introduced in November 2017 to help people step onto the property ladder.

Our guide on the first-time buyer exemption has more detail.

When do you pay stamp duty?

You must pay stamp duty within 14 days of completing your property purchase. Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.

What other government support is available?

During the second lockdown, the government extended its offer of mortgage payment holidays. Borrowers who need help paying their mortgages can still request a holiday of up to six months until 31 March 2021.

Meanwhile, the government's Help to Buy scheme offers an equity loan to buyers with a 5% deposit. The initiative will close on 31 March and be replaced with a new version, which will only be available to first-time buyers.

Find out some of the other initiatives and allowances you could benefit from before the end of the tax year in our article.

The Chancellor also announced a new scheme in the Budget under which home buyers will be able to take out a 95% mortgage, with the government acting as guarantor.

The scheme comes after Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” at the Conservative party conference in October last year. A number of lenders have already signed up to the scheme, which will launch next month.

What about stamp duty in Scotland and Wales?

Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland.

Scotland and Wales have equivalent taxes, and similar breaks have been introduced.

Scotland

In April 2015, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT).

In Scotland, the LBTT rates are:

  • 0% up to £145,000
  • 2% on £145,001-£250,000
  • 5% on £250,001-£325,000
  • 10% on £325,001-£750,000
  • 12% on any value above £750,000

First-time buyers pay no LBTT up to £175,000.

Wales

Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.

LTT rates are:

  • 0% up to £180,000
  • 3.5% on £180,001-£250,000
  • 5% on £250,001-£400,000
  • 7.5% on £400,001-£750,000
  • 10% on £750,001-£1.5m
  • 12% on any value above £1.5m

In December, the Welsh government introduced an additional charge for second-home owners.

Second home-owners will now pay a 4% levy when they buy homes up to £180,000, rising to 16% for homes worth £1.6m or above.


Help to Buy: how it's impacted home buyers

The latest government figures reveal who has used the flagship scheme to step onto or up the housing ladder – and how.

More than 290,000 people have used the government’s flagship Help to Buy equity loan scheme to buy a home.

A total of 291,903 buyers had used the scheme by the end of September, seven-and-half years after it was first launched.

Help to Buy enables people to purchase a new-build home with just a 5% deposit, which the government tops up with a 20% equity loan that is interest-free for five years.

The average cost of a home purchased through the scheme was £290,000 between July and August 2020, while more than half of those using Help to Buy had a household income of £50,000 or less.

Who has used Help to Buy?

First-time buyers

First-time buyers have benefitted the most from Help to Buy, accounting for 82% of all purchases made through the initiative, government figures showed.

The average property bought using Help to Buy by people taking their first step onto the housing ladder cost £279,995, while they had a typical household income of £53,218.

A new version of the scheme is being launched on 1 April that will be available exclusively to first-time buyers.

It will also see the introduction of regional price caps on the value of properties that can be purchased through the scheme.

These price caps range from £186,100 in the north east to £437,600 in the south east and £600,000 in London.

Homeowners

People who already owned a home or had previously done so have also benefitted from Help to Buy.

While they only account for 18% of all purchases made using the scheme, the typical home they bought was significantly more expensive than those purchased by first-time buyers at an average of £346,995, while they had an average household income of £60,960.

Homeowners were also more likely to put down deposits that were higher than 5%, with nearly a third putting down a deposit of more than 15%.

Buyers in London

Unlike the rest of the country, where the size of the equity loan is capped at 20% of the property’s value, people buying a home in London can apply for an equity loan worth 40% of their property’s value.

Unsurprisingly, the average purchase price paid by people using Help to Buy in London was significantly higher than the national average at £430,168.

What sort of property have they bought?

A quarter of all properties bought by first-time buyers since Help to Buy’s launch have been detached houses, while 34% have been semi-detached homes.

Only one in five properties bought using the initiative have been flats, which are typically seen as first-time buyer homes.

What’s the background?

The Help to Buy equity loan scheme was designed to overcome one of the biggest barriers many people faced to homeownership, namely saving a large enough deposit to enable them to qualify for a mortgage.

The number of homes bought using the government scheme has increased every year since its launch, apart from in 2020 when transaction levels were impacted by the pandemic lockdowns.

Even then, the number of homes bought using Help to Buy were still 11% higher between July and August 2020, once the housing market had fully reopened, than they were in the same three months the previous year.

Top three takeaways

  • More than 290,000 buyers have used the Help to Buy equity loan scheme since it was first launched
  • First-time buyers have been the biggest beneficiaries, accounting for 82% of all purchases made through the scheme
  • The average cost of a home bought through Help to Buy was £290,000 between July and August 2020

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.