Purchasing a house: can there be still time to take advantage of the stamp duty holiday?

The stamp duty holiday has sent the home market into overdrive, with house prices and sale figures soaring, but could it be past too far to create a big saving when buying a house?

The current tax break is placed to wind down from 1 July, but buyers in England and Northern Ireland will still be able to make stamp duty savings right up until the end of September.

Here, Which? explains how stamp duty rates can change from next month, while offering suggestions about whether now's a good time to buy a home.

What may be the stamp duty holiday?

Last July, the government temporarily introduced higher stamp duty thresholds in a bid to get the property market moving after the first Covid-19 lockdown.

The changes enabled buyers in England and Northern Ireland to benefit from the lb500,000 tax-free threshold, up from lb125,000 for existing homeowners or lb300,000 for first-time buyers.

In practice, this resulted in a home mover purchasing a property for lb500,000 or more would save lb15,000 on the usual stamp duty bill.

In Wales, the conventional threshold of lb180,000 was increased to lb250,000, and in Scotland the threshold of lb145,000 (or lb175,000 for first-time buyers) was increased to lb250,000.

When will the stamp duty holiday end?

The stamp duty holiday ended on 31 March in Scotland, and Wales will follow suit on 30 June.

In England and Northern Ireland, the tax break is going to be tapered rather than ending completely.

On 1 July, the temporary lb500,000 threshold is going to be cut to lb250,000 until 30 September, then the typical thresholds will be reinstated.

This means buyers in England and Northern Ireland will have the chance to make savings if they buy a home before the start of October.

How much will I save basically buy before 30 September?

Unless you’re currently in the process of exchanging contracts, it will be near-impossible to get a house purchase within the line prior to the end of June and take advantage of the biggest savings.

You may, however, are able of completing before the end of September.

The reduced lb250,000 threshold between July and September offers savings as high as lb2,500 for home movers.

The table below shows just how much you’ll have to pay in stamp duty when purchasing a house in England or Northern Ireland.

Use our stamp duty calculator

If you’re considering buying a home and want to know how much you’ll need to pay in tax, you can use our stamp duty calculator below.

How will the changes affect first-time buyers?

First-time buyers in England and Northern Ireland won’t make any tax savings once the threshold is reduced to lb250,000 on 1 July.

That’s because individuals buying their first home already take advantage of a stamp duty threshold of lb300,000, which was introduced in 2021.

This allowance means most first-time buyers already don’t pay any stamp duty, unless they’re buying homes in more expensive areas.

Data in the Land Registry shows first-time buyers in England pay an average of lb228,000, well underneath the lb300,000 tax threshold.

How has the stamp duty holiday affected the market?

The stamp duty break has already established a significant effect on house prices and also the quantity of homes being sold.

Land Registry data shows house prices rose by 10% year-on-year in March to achieve typically lb256,000.

Sale numbers also spiked, with figures from HM Revenue & Customs showing 118,000 people moved home this April.

Research through the estate agent comparison website GetAgent discovered that when the break ends, over half a million homebuyers in England may have benefited from the stamp duty cut.

Its projections reveal that 76% of buyers may have avoided paying any stamp duty throughout the holiday, with total savings hitting lb3.4bn.

Do high house prices counteract the savings?

The tax cut has been a welcome development for people seeking to cut the extra costs of purchasing a home, however it has served to push-up demand.

The combination of the tax cut and changing buyer priorities because the start of pandemic is responsible for an ideal storm in the property market, leading to soaring house prices.

If you’re thinking of buying a home now, you’ll have to consider whether or not this is sensible to accept leap during a time when the market is burning, as while you might save money on tax, you can end up overpaying for that property itself.

In short term, overpaying would leave you vulnerable if prices fall after the stamp duty holiday ends, so before making that big purchase, consider whether now's the right time and whether you’re making the move in the future.

When will it be too late to create a saving?

There’s just over three-and-a-half months left to make a stamp duty saving when purchasing a property in England or Northern Ireland.

This may appear like sufficient time to get your purchase completed, but there are significant delays in the home buying process.

Property portal Rightmove says more than 700,000 house purchases are currently within the works, and delays are most likely.

Earlier this week, The Law Society spoke of ‘stressed and under-pressure solicitors working late in to the night and over weekends, with little if any work-life balance, to ensure their clients' transactions can complete according to their wishes.’

This rush comes ahead of the lb500,000 threshold being lowered at the end of the month, and won’t necessarily scupper your chances of buying a home before the end of September.

That said, it’s important to be realistic and manage your expectations over how fast you’ll be able to move.

The Which? Money Podcast: is now the time to obtain a mortgage?

On a brighter note, homebuyers looking to get an inexpensive mortgage deal when upgrading the home ladder might be fortunate.

Mortgages minute rates are very attractive at the moment, with rates below 1% available these days for buyers with big deposits.

On last week’s Which? Money Podcast, we discussed the latest developments within the mortgage market, including whether this is the time to lock in a deal and also the options now available to first-time buyers.

You can pay attention to the full episode below.