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Should I buy a house during the stamp duty holiday?

author: Sarah Neate

By Sarah Neate

The stamp duty holiday has been extended, but does this mean you should rush to buy a house before it ends? With housing prices uncertain and completion times varying, you need to weigh up the best choice for you. 

Potentially, you could save a bundle, depending on the price of the property you’re after and whether you’re a first-time buyer (or buying with no chain). The main things to consider are the price of property you’re after and how quickly a sale is likely to complete.  

What is Stamp Duty? 

Stamp Duty is a tax that’s payable when you buy a property. It applies to purchases above £125,000.  

It’s called stamp duty in England and Northern Ireland but for Scotland and Wales it’s called: 

  • Land and Buildings Transaction Tax in Scotland 
  • Land Transaction Tax in Wales 

What changes were made to Stamp Duty laws? 

Due to coronavirus, a stamp duty holiday was announced to help people to move. The stamp duty threshold was increased from £125,000 to £500,000 meaning no stamp duty is payable on property purchases less than £500,000.  

The stamp duty holiday has been extended until the end of June 2021. From 1 July 2021 to 30 September 2021 the stamp duty threshold will reduce to £250,000 and from October it will be back to normal with a threshold of £125,000. 

How has this affected the housing market? 

Some people have rushed to buy properties to take advantage of this holiday which has meant that some house prices have increased. The property market can be volatile and is especially unpredictable at the moment - nobody can guarantee what will happen in a few months’ time. So, do your research before making an offer to check that it’s a fair price for the property and location. When the stamp duty holiday nears the end house prices may go down as the rush to move slows down. 

Who might benefit from buying now? 

If you know you´re moving anyway and the house you want to buy is valued above the new stamp duty thresholds, then you could save money by buying now. Families who are upsizing and planning on staying put for several years will be able to ride out any short time dips in the housing market. In short, if you planned to move anyway then buying now could be a wise decision. 

First-time buyers buying over £300,000 

First-time buyers who want to spend more than £300,000 would save money buying now providing they’re not planning on moving too soon afterwards. For example, if you want to buy a property that’s worth up to £500,000 you’ll pay stamp duty £0 if your purchase completes before the end of June  

Use this handy stamp duty calculator to see how much you might have to pay or could save. Since first-time buyers have no chain, this could be one of the fastest completions – depending on the position of the vendor of the place you’re buying. 

Cash buyers and no chain 

Since it’s all about speed at the moment, to benefit from this stamp duty holiday – if you have no chain or you’re buying a property with no chain, now could be a great time. This is because it can be a much quicker completion. 

Our top tip is to try and find a solicitor with some capacity left, as many are very busy at the moment, due to the increased demand. 

Who would benefit from waiting? 

If you’re not in a rush to move then it could be worth waiting to see if house prices will come down when the stamp duty holiday ends. Buying a property just to flip it - to renovate and sell on quickly - might not be a good idea at the moment. If house prices did drop then you might find that what you saved in stamp duty you just lost in property value. For example, if you bought a house for £400,000 and saved paying £10,000 stamp duty, you would lose £16,000 if the house value then fell by 4%. 

First time buyers buying under £300,000 

With the normal stamp duty rules, first-time buyers don´t pay stamp duty on a property up to £300,000 so if you’re a first-time buyer who’ll be spending less than this anyway then you may benefit from waiting to see if house prices come down after the holiday has ended. 

Find out how long it could take to buy a house. 

Disclaimer: All information and links are correct at the time of publishing.

author: Sarah Neate

By Sarah Neate

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couple stood in kitchen with estate agent viewing a house couple stood in kitchen with estate agent viewing a house