The effect of the new stamp duty threshold

JULY 2021

Now that the first phase of the stamp duty holiday has ended, we can assess the impact on the pockets of buyers across the country. Those purchasing in expensive markets, especially those in the south of England, will be hit hardest. In some cases, they will see their tax bills rise by more than £10,000.

Until 30th June, the threshold for paying stamp duty was £500,000, but this has now fallen to £250,000 for sales that complete by 30th September. While the initial holiday lifted 85% of movers out of paying stamp duty, this figure has now fallen to 48%. When the holiday comes to a close at the end of September, just 13% of movers will pay no stamp duty. 

The reduction in the nil rate band from £500,000 to £250,000 means that the average stamp duty bill for a home mover in England will increase by £3,720 – from £3,240 for property purchases that completed before the end of June to £6,960 now. 

However, this average figure, which is based on sales from the last 12 months, masks significant regional differences. London buyers will be worst affected by the tapering, with buyers in 9 of the 10 local authorities facing the biggest increases in stamp duty bills located in the capital.

Before June, 51% of movers in London were not liable to pay any stamp duty. However, this proportion will fall to just 6% during the three months up until October.

In the City of London, where the average property price is £998,865, stamp duty bills will rise by an average of £12,209 to £46,441. In Kensington and Chelsea, where homes cost £2,201,885 on average, tax bills will increase by £11,904 to £110,214.

For purchasers in South Buckinghamshire, the only non-London location in the top 10 and where homes cost an average of £829,025, stamp duty bills will go up by £10,780 to £30,942.

At the other end of the scale, buyers in northern England will see the smallest increases in stamp duty bills. On a regional basis, the North East is least affected. Here, the average property price is £162,860 and a buyer will now pay an average of £1,060 in stamp duty, £850 more than if they had bought before the end of June.

Buyers in Hull, where homes cost an average of £123,100, are seeing the smallest uplift in their bill – stamp duty for them will go from an average of £74 to £184.

Buyers who had offers accepted during May and June will have already factored these changes into their negotiations, while some of those who had been expecting to complete in time but missed out may try to renegotiate. However, with the stock of property for sale still scarce, sellers will likely hold most of the cards.

But there are still savings to be had before the holiday ends.  The threshold for paying stamp duty will revert to its normal level of £125,000 on 1st October, so buyers can still save an average of £1,730 if they can complete a purchase before this date. Around 55% of buyers who had an offer accepted in June will complete before the deadline.

The first phase of the holiday had a huge impact on the Treasury’s pockets – we estimate that buyers in England will have paid a collective £5.1bn in stamp duty over the 12 months to June 2021. That’s £3.6bn less than if they had been paying normal rates.