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What happens when the stamp duty holiday ends?

What happens when the stamp duty holiday ends?
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The stamp duty holiday was recently extended by the government until the end of June. But what will happen when it ends? Could the stamp duty holiday deadline be extended further?

We’ve got the answers.

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How does the stamp duty holiday work?

Under the stamp duty holiday, homebuyers in England and Northern Ireland don’t have to pay stamp duty on the first £500,000 of the property they buy. This can translate to savings of up to £15,000.

Landlords and second home buyers also qualify for the tax break. However, they have to pay a 3% surcharge on top of the revised rates.

The stamp duty holiday was introduced by the government to boost the housing market after it was hit hard by the first national lockdown in spring last year. The other aim was to help aspiring home buyers whose personal finances might have taken a hit.

When is the stamp duty holiday deadline?

The stamp duty holiday was originally due to end in March. However, when announcing the Budget, Chancellor Rishi Sunak confirmed that the holiday will be extended until 30 June 2021.

One reason the deadline was extended was the backlog of sales due to increased market activity in recent months. Thousands of buyers were facing the prospects of missing the deadline. Reports suggest that as many as 100,000 sales were in danger of falling through.

The new deadline means that buyers now have three extra months to complete.

What will happen after it ends?

Once the stamp duty holiday ends, the stamp duty threshold will drop from £500,000 to £250,000 in July. This will continue until September.

From October, the threshold will return to its normal limit of £125,000. The threshold for first-time buyers will remain at £300,000.

Stamp duty is calculated after completion. So if you complete before the June deadline, you won’t pay stamp duty. However, if you exchange contracts but don’t complete until after the deadline, you’ll have to pay stamp duty on any amount in excess of £250,000 (unless, of course, you are a first-time buyer).

Will there be a further extension of the stamp duty holiday?

The chances of the stamp duty deadline being extended further are quite low. The chancellor has set out a clear route to stamp duty returning to normal levels. If you’re at the beginning of your property buying journey, you may therefore still need to budget for stamp duty.

The tapered return to the normal stamp duty threshold could still offer some relief until the end of September. Normal rates don’t kick in again until October.

What other help could I get when buying a home?

The chancellor also announced a new mortgage guarantee scheme. Under the scheme, buyers will be able to access a mortgage with only a 5% deposit. The government will provide a guarantee to the lenders that offer this kind of mortgage. This is for properties with a value of up to £600,000.

The new Help to Buy: Equity Loan scheme, which helps first-time buyers to buy a house with just a 5% deposit will be open from April.

Even with all these government initiatives available, remember that you still need to ensure your personal finances are in order. The state of your finances will play a huge role in a lender’s decision to give or deny you a mortgage.

One thing you can do is spruce up your credit rating and improve your score. This can help demonstrate that you are a responsible borrower. Check out our practical tips on how to improve your credit score.

And if you are currently saving for a deposit, see whether you could grow your savings faster by transferring them to a cash savings account with a higher interest rate.

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