Chancellor Rishi Sunak’s says his stamp duty and mortgage measures in last week’s Budget will turn “generation rent” into “generation buy”. This article looks at these measures and the extension to the business rates holiday for the retail, hospitality and leisure sector announced in the Budget.
Stamp Duty Land Tax (SDLT)
The Stamp Duty Land Tax holiday due to end on 31 March 2021 was extended until 30 June 2021 in last week’s Budget.
Last July, chancellor Rishi Sunak temporarily increased the SDLT nil rate band for residential properties in England and Northern Ireland to £500,000. The threshold was previously £125,000 (£300,000 for first-time buyers). Buyers spending more than £500,000 during the holiday save £15,000.
Sunak explained the extension by saying that the holiday had “helped hundreds of thousands of people buy a home and supported the economy at a critical time”.
“But,” he continued, “due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March.”
To smooth the transition back to normal, from 1 July to 30 September 2021, the nil rate band will reduce to £250,000 before reverting to its original figure, £125,000, on 1 October 2021.
SDLT surcharge for non-resident buyers
From 1 April 2021, non-UK residents buying residential properties of £40,000 or more will pay an SDLT surcharge of 2% above the existing residential rates. The surcharge is in addition to the existing 3% surcharge for second homes, meaning a non-UK residential could potentially pay 5% above the existing residential rates.
“Lenders who provide mortgages to home buyers who can only afford a five percent deposit will benefit from a government guarantee on those mortgages”
Mortgage guarantee scheme
Sunak said in his Budget speech that despite the stamp duty cut, “there is there is still a significant barrier to people getting on the housing ladder – the cost of a deposit.”
To counter this, a new residential mortgage guarantee scheme will run from 1 April 2021 to 31 December 2022. “Lenders who provide mortgages to home buyers who can only afford a five percent deposit will benefit from a government guarantee on those mortgages,” said Sunak.
Lloyds, NatWest, Santander, Barclays and HSBC have already committed to offering these 95% mortgages, with others expected to follow. The maximum property value will be £600,000, and mortgages must be arranged on a repayment basis. According to Rightmove, homes of less than £600,000 account for 86% of all homes currently up for sale in the UK.
The chancellor also announced that the business rates holiday for retail, hospitality and leisure businesses granted last year will be extended for three months until 30 June 2021. This will be followed by 66% business rates relief from 1 July 2021 to 31 March 2022, capped at £2m per business for properties required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.
Finally, full business rates relief will be available to all new businesses and certain existing businesses that expand until September 2026. Relief will apply for five years from when the business first receives relief.
If you have any queries in relation to any issues raised in the Budget relating to residential or commercial property, please contact us now.