What The 2021 Budget Means For Homebuyers, Employers, and Investors?

On 3 March 2021, Chancellor Rishi Sunak delivered this year’s budget. A year ago, two weeks before the first Coronavirus lockdown, the Conservative Party was promising to spend enormous sums in order to ‘level up’ and reward the so called ‘red-wall’ voters. Then everything changed almost overnight, and most of the money set aside for infrastructure spending etc was diverted into saving the economy, people’s jobs, and the NHS. This year’s budget was about continuing to provide Coronavirus support and paying for the mountain of debt accrued in fighting the pandemic. However, given the circumstances the country (and the world) are in, there was some surprisingly good news from the Treasury.

Residential Property Solicitors in London can help more people buy their home

Those looking to purchase a home have been given a double-shot of good news. Not only is the Stamp Duty Land Tax (SDLT) holiday being extended to the end of June, first home buyers are also set to benefit from a government-backed low deposit mortgage scheme.

Stamp Duty Land Tax

Introduced in July 2020 to help the residential property market recover after it came to a virtual standstill in the first lockdown, the SDLT raised the tax-free threshold to £500,000. This meant most homebuyers have not had to pay SDLT when buying a new home, saving them thousands of pounds. There was concern that the property market would fall off a cliff-edge if the tax break was abruptly ended on 31 March, as many transactions would not have completed, leading to buyers pulling out of sales as they would not be able to afford to pay SDLT. Thankfully, the Chancellor announced that the tax-free threshold would remain until 30 June 2021. From 30 June to the end of September 2021, the nil rate band will be set at £250,000 – double its standard level.

Low-deposit mortgages

Low-deposit mortgages have essentially disappeared over the last 12 months (although the number of lenders offering them has been declining since the 2008 financial crisis). This has made it almost impossible for first-time buyers, especially in London and the South-East, to save enough for a minimum 10% deposit. The government has said it is determined to turn ‘generation rent’ into ‘generation buy’.

To help all home buyers (not just those trying to get on the property ladder), the Chancellor confirmed that:

“several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays, and HSBC will be offering these 95% mortgages from next month.”  

Buyers will pay just 5% deposits to buy homes worth up to £600,000. The government will offer lenders a guarantee to provide mortgages covering the remaining 95%.

Businesses can continue to benefit from the Furlough Scheme

For both employers and employees, the Budget announcement that the Government’s Job Retention Scheme is being extended until September will be welcome. 

Speaking in the Commons, Mr Sunak said:

“As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September.”

Mr Sunak told the Commons: “As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September.”

Despite this positive news, there is likely to be redundancies when the Furlough Scheme does come to an end. For employees, this may mean seeking employment law advice on Settlement Agreements and whether they have a claim for unfair dismissal. Employers may need to see an employment lawyer for advice on ensuring the strict statutory redundancy process is correctly followed.

Inheritance Tax Solicitors can advise on the best estate planning strategies

For some, the budget did not bring good news. Although the Chancellor did not raise Income Tax, National Insurance, or VAT, a freeze was put on Inheritance Tax, pension ‘lifetime allowances’, and the personal tax allowance thresholds. As wages and the value of assets increase over the next few years, more people will be subject to increased taxes.

To protect your wealth, tax planning is essential. An Estate and Inheritance Tax Planning Solicitor will carefully evaluate your investments and advise on actions to take to avoid paying more tax than is necessary. Because the government’s need to repay the deficit will become more pressing over the coming years, it is vital to get your tax planning in order immediately.

To make an appointment to discuss any aspect of residential property, employment, or tax planning law please send us an email or phone 020 83490321.

UK Stamp Duty Holiday set to be extended?

It has been widely reported that the Chancellor of the Exchequer, Rishi Sunak is likely to extend the Stamp Duty Land Tax (SDLT) holiday for a further three months.  This will occur when he presents his budget on 3rd March 2021.

With the looming threat of over 200,000 current residential property transactions collapsing when the SDLT holiday ends on 31 March 2021, estate agents, solicitors, mortgage lenders, as well as buyers and sellers welcome the news of a possible extension.

Residential property solicitors in London are urging people not to make any financial commitments on the back of the reports that the SDLT holiday will be extended.  One thing that the Coronavirus pandemic has taught us is that government promises and policies can swiftly change.

In this article, we explain what stamp duty is and why not extending the holiday poses a serious risk to the property market.

What is Stamp Duty?

If you buy land above a certain price threshold in England or Northern Ireland, either freehold or leasehold, you may have to pay SDLT.  Scotland and Wales have different but equivalent taxes.

What is the Stamp Duty holiday?

During the first lockdown in March 2020, the residential property market virtually ground to a halt.  To help it recover, Rishi Sunak introduced a SDLT holiday, waiving the tax on the first £500,000 of the property price. 

SDLT over the first £500,000 is calculated as follows:

Property Value Stamp Duty Rate
£500,001 to £925,000 5%
£925,001 to £1.5 million 10%
above £1.5 million 12%

The above applies to people who are purchasing a property that will be their only home.

If you are purchasing an additional home, the SDLT rates up until 31 March 2021 are as follows:

Property Value Stamp Duty Rate
Up to £500,000 Up to 3%
£500,001 to £925,000 8%
£925,001 to £1.5 million 13%
above £1.5 million 15%

 

Why are residential property lawyers and estate agents so concerned about the end of the SDLT holiday?

There is pressure on the Treasury to extend the SDLT holiday in some form to avoid a ‘cliff-edge’ situation of thousands of house sales falling through because buyers cannot afford to pay normal stamp duty.

The time for a sale and purchase transaction to complete has become significantly longer due to the sheer number of house purchases and the fact that many organisations and businesses involved in real estate transactions have had staff off either sick or self-isolating.

Obtaining property searches is one of the main reasons for delays.  In December 2020, around 8% of local authorities were reporting significant delays in returning searches with turnaround times for all of these local authorities exceeding 26 working days.

There have also been major delays in processing mortgage applications.

A stable property market is essential to the UK economy.  Residential property represents the largest proportion of most people’s consumer wealth.  The Bank of England puts it succinctly:

“The housing market is closely linked to consumer spending. When house prices go up, homeowners become better off and feel more confident. Some people will borrow more against the value of their home, either to spend on goods and services, renovate their house, supplement their pension, or pay off other debt.

When house prices go down, homeowners risk that their house will be worth less than their outstanding mortgage.  People are therefore more likely to cut down on spending and hold off from making personal investments.”

Will the stamp duty holiday be extended?

The government has given no assurances that the SDLT holiday will be extended.  And even if it is, it may not continue in its current form, as doing so would merely ‘kick the can down the road’, leaving the property market vulnerable to another ‘cliff-edge’ in June.

To mitigate the risk of the property market plummeting, the Treasury may extend the holiday only to those who have reached a certain stage in their residential property transaction, for example, agreeing with solicitors to exchange contracts.  Alternatively, the tax relief available may be tapered down between March and June.

Either of the above scenarios will result in transactions becoming more complicated, and therefore, the Chancellor may decide on a blanket extension to the existing relief, taking a chance that the vaccine programme and easing of lockdown will boost confidence enough to ensure the market stays buoyant throughout the summer.

We will update you as soon as a decision is made. In the meantime, if you are concerned about your current house sale or purchase or want advice on how to take advantage of the SDLT holiday, please get in touch with a member of our conveyancing team today.

To make an appointment to discuss any aspect of residential property law please email or call us on 020 8349 0321.

Stamp Duty exemption for UK home buyers

The COVID-19 pandemic has turned many industries upside down by virtually shutting off their customer base, and the Government has resorted to a variety of extreme measures in order to limit the damage that the businesses in these industries suffer. Of all these measures, one of the biggest is the Stamp Duty holiday, which could exempt home buyers from tens of thousands of pounds in costs. So how does the holiday work, who does it affect, and how can we help? Let’s take a look.

What is the Stamp Duty holiday?

Chancellor Rishi Sunak implemented the Stamp Duty holiday to revive the flagging housing market, as the residential property market clamped up in response to the economic situation. The measures mean that Stamp Duty only has to be paid on properties worth more than £500,000, rather than the £300,000 limit under the old rules. This measure actually doesn’t mean much for first time home buyers, because the average new house only costs £208,000, but to professional landlords and investors, it can mean a huge boost to their profits.

What are the potential savings?

For property dealers who regularly transact in homes worth more than £500,000 the old SDLT regime would have seen them pay in excess of £30,000 in Stamp Duty alone, paying 3% on the first £125,000, 5% on the next £125,000 and 8% on the last £250,000. Now, as a result of these changes they will only pay the minimum rate of 3% on the sale, so a £500,000 property will only cost them £15,000 in tax. Clearly it’s well worth considering investing during this holiday, which ends in March 2021, due to the level of potential savings.

How can we help?

If you’re an existing landlord or investor hoping to capitalise on the holiday, or you’re a new starter looking to dip your toes in the water, it pays to get expert advice in these unprecedented times. While this is a potentially golden opportunity to make a life-changing investment, the difficult economy also makes it a serious risk, and to go about it without the best help could have serious consequences. Thanks to our years of conveyancing experience, and our down to earth and no-nonsense advice, we can help you make the best investment with your money and to ensure you make the most out of the SDLT holiday. If you’ve got your eye on a property, and you’d like to make your move during this time, get in touch with us on (0)20 8349 5501.