Tax on Stamp Duty: what’s changing?
The extended stamp duty holiday in England and Northern Ireland ends on 30th June, so if you’re a buyer, are you rushing to close before then?
It doesn’t seem like you’re the only one! Currently, Rightmove spotted over 700,000 homes being sold, which is the highest number in the last decade.
When do stamp duty rates change?
The stamp duty holiday has already been extended once, from 31st March to 30th June. From 1st July, there will be a staggered return to previous stamp duty rates, with the nil-rate band lowered from £500,000 to £250,000 until the end of September. From 1st October, it will return to £125,000.
There are several factors that affect the amount of stamp duty tax you’ll have to pay, including the cost of the property, its location, whether you possess a British passport, when you buy, and whether you’re a first-time buyer. You should also consider whether you’re buying a primary residence, a vacation home, or an investment property.
Stamp duty changes: key dates
- 8th July 2020: The Chancellor announced reducing Stamp Duty Land Tax (SDLT) in England and Northern Ireland, by increasing the threshold to £500,000, for the whole year until 31 March 2021.
- 3rd March 2021: In his Spring Budget speech, the Chancellor said that high home sales volumes would prevent many new purchases from being completed by the end of March. Due to this, the stamp duty holiday was extended for three months, until June 30th. Moreover, the nil rate band, or the part of the purchase that is exempt from stamp duty tax, will reduce from July to £250,000, returning to its previous level of £125,000 only on October 1st, 2021.
- 30th June 2021: To take advantage of the maximum stamp duty holiday savings, you must complete your purchase by this date.
- 1st July 2021: The stamp duty rates will return to the previous levels beginning July 1 and lasting until September 30. There is no stamp duty on the first £250,000 of a property purchase in England or Northern Ireland during this time.
- 30th September 2021: In order to benefit from the staggered extension of the stamp duty holiday, you must complete your property purchase by 30th September.
City Centers and Flats see Demand Rise Post-Lockdown
The Rightmove analysis found that buyer demand for flats grew the most when compared with other types of properties. More than 39 per cent of people contacted estate agents to ask for more information about a flat for sale between April and January.
As a result of the easing of coronavirus restrictions, buyer demand in city centers increased by more than 76 percent in York, 62 percent in Norwich, and 57 percent in Sheffield.
Buyer demand in the capital increased by 30 per cent in April when compared to January, while demand in outer London increased by 34 per cent.
Investors from the Middle East are returning to the UK Property Market
The return comes as Prime Central London (PCL) property prices rose for the first time in five years.
Below you can see the percentage of Middle East investors in UK property market:
- Q1 2021: 16%
- Q4 2020: 13%
- Q2 and Q3 2020: 10%
The market is picking up where it left off after the general election in December 2019, and buyers in the Middle East can find good value after five or six years of falling prices.
International travel restrictions are expected to ease, increasing overseas investor activity in the UK. Knight Frank says Mayfair and Knightsbridge are likely to experience a ‘noticeable increase’.
Changing Oxford Circus Into Two Piazzas For Pedestrians
As part of a plan to create a greener Central London, Oxford Circus will be transformed into two pedestrian-friendly piazzas which are also expected to improve access to the tube station.
Westminister Council, which is leading the effort, says it will enhance the experience of residents, workers, and visitors alike.
As a result of the changes, the area will experience less pedestrian congestion, and traffic will likely be reduced, so air quality will also improve.
As part of the transformation, the area will boast more dining, drinking, and shopping options, as well as more seating and landscaping to improve the overall look and feel of the area.
Oxford Street will receive £150 million in projects from the City Council.
What does Leasehold Ground Rent Reform mean for Developers?
If this Bill becomes law, its provisions will apply to all dwellings (houses and flats) that are leased on a long-term (over 21 years) basis. The Bill will also apply to retirement housing, but, in this case, the application is due to take place at a later time. The Bill specifies that its provisions won’t apply to retirement housing until 1 April 2023.
It is important that developers selling new leasehold properties, as well as landlords with existing stock, are aware of the following key changes:
- Residential leases granted after the Bill comes into law are likely to be subject to a peppercorn rent reduction.
- In terms of lease agreements and lease agreements concluded prior to the Bill becoming law, the new ground rent provisions will not be applicable to them, however, if an existing lease contract is amended after the Bill becoming law, any amendment will be subject to the new ground rent requirements.
- In the case of lease variations which result in surrender and re-grants after the Bill goes into effect, peppercorn rent will be charged.
For those who follow the market commentary, these changes won’t come as a surprise. Any development that intends to use the Help to Buy scheme is already required to charge peppercorn ground rent. This applies to all units within the development, regardless of whether it is purchased through the Help to Buy scheme.
There are some exceptions included in the Bill, including provisions for Islamic lending and equity release, home business leases, which govern both the use of homes and businesses, and certain communities-led housing projects, but these exceptions have limited applicability to most residential developers.
If landlords fail to comply with the reduction in ground rent, then they could face severe financial penalties of £500 to £5,000 per lease (meaning property owners could be facing substantial penalties if a large block is found to be noncompliant).
Additional measures involving lease extension terms, marriage value abolition, and online lease extensions calculators are also planned as part of the package of changes designed to revitalise the leasehold sector in due course.
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