In his 8 July summer statement, Chancellor Rishi Sunak confirmed that the stamp duty threshold will be immediately raised to £500,000 in England and Northern Ireland, in what some have dubbed the ‘stamp duty holiday’. The rise in threshold lasts until 31 March 2021 and will apply to both first-time buyers and previous owners.

Sunak said that the change will affect around 90% of buyers, saving each one an average of £4,500.

Stamp duty is a tax you have to pay if you buy a property or a piece of land in England or Northern Ireland. Buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of stamp duty. 

The property website Rightmove said traffic to its listings increased by 22% immediately after Sunak’s announcement, an indication that this could be the stimulus for many to come to a decision about moving home.

The move comes in response to the current economic crisis. Many are worried that the housing market will stagnate in the current economic climate. Lockdown measures put sales on hold and prevented work on construction sites. The number of transactions was down by 50% in May. 

Stamp duty will be collected at a rate of 5% on transactions over £500,000. For instance, if you bought a house for £575,000, you would pay 0% on the first £500,000 and 5% on the final £75,000. Overall, you would pay £3,750 in stamp duty.

What about buy-to-let and second homes?

The stamp duty cut will also apply to those buying second homes and buy-to-let properties, allowing investors to make savings. However, the 3% surcharge for buying additional properties will apply to the new stamp duty rates.

So, property investors spending less than £500,000 would only need to pay 3% on top of the purchase, as opposed to the previous 5%.  

The housing market has responded well to the rise in threshold. It frees up larger properties for families, which they previously may not have been able to afford, and it could help first-time buyers onto the property ladder.

It’s widely expected that the stamp duty holiday will have an immediate impact on the volume of sales agreed in the coming weeks. Please get in touch if you’d like to know more about how the ‘stamp duty holiday’ will affect you.

The use of cash was already dwindling in recent years, with cards being the preferred method of payment (especially contactless). Since the outbreak of Covid-19, however, the use of physical money has reduced much further, with many shoppers wary of touching it.             

The number of withdrawals from cash machines during lockdown is down by 60%, although people took out larger sums than usual at a time. As there were fewer places for people to go out and spend money, with bars and restaurants closed, it was believed many people were hoarding ‘cash’ at home, just ‘in case’. 

Not surprisingly, card payments increased significantly due to the surge in online shopping, especially for groceries.     

According to a survey of consumers by Link, which is responsible for the UK’s cash machine network, 75% of people were using less cash, and 54% said they were avoiding cash. Just over three quarters of those surveyed said they expected to move to other forms of payment or online shopping in the next six months.

It will be interesting to see whether people continue to change these habits post-lockdown and make a permanent switch to digital payments.  

One of the issues will be that if a significant number of people stop using cash, there will not be enough demand to make ATMs profitable. The infrastructure of delivering cash could completely collapse. 

Electronic banknotes 

Prior to the pandemic, the Bank of England was already considering the introduction of electronic banknotes. This would be a major revolution as the current system of people using central bank money in the form of paper banknotes has been in place for 300 years. 

The idea would be to have a Digital Central Bank Currency, where £10 of the digital currency would be worth the same as a £10 note. You would load up Central Bank Digital Currency, just as you would withdraw banknotes from an ATM, but electronically. The system would be guaranteed by the Bank rather than a commercial enterprise. 

The Bank has stressed this would complement not replace paper banknotes as long as there was still a demand for physical cash.

This is important as the independent Access to Cash Review revealed that 20% of the population, including the elderly and vulnerable, are still dependent on notes and coins. Assurances have been made that cash won’t completely disappear and legislation was passed in March to ensure that it would be protected for those who need it.        

The Bank of England called for input into their discussion over digital currency up to mid-June so the outcome will be awaited with interest.    

The Covid-19 pandemic has had a drastic effect on the global economy, with the IMF predicting “the worst economic downturn since the Great Depression.” Social distancing measures, supply chain disruption and economic uncertainty have caused British economic growth to plummet – GDP fell by a record 20.4% in April. 

The government clearly sees increased spending as an essential part of the country’s route out of this crisis and Chancellor Rishi Sunak didn’t shy away from opening the purse strings in his 8 July statement. Speaking to a socially distanced House of Commons, Sunak outlined his spending measures to fire up the British economy. Here are some of his key points:

Housing and stamp duty threshold change

The housing market has been hit hard by the crisis. Sunak said that transactions had fallen by 50% in May. It is understandable, then, that he announced a change to stamp duty threshold, to “give people the confidence to move.”

From 8 July to 31 March next year, stamp duty thresholds were raised from the current £125,000 to £500,000 in England and Northern Ireland. This means that nine out of ten people buying a home will pay no stamp duty, a significant saving for the vast majority of homebuyers. Currently just 16% of buyers avoid paying stamp duty.

Job retention bonus

To date, the furlough scheme has supported the wages of over 9m employees across the country. On Wednesday, the Chancellor announced a further support measure: the Job Retention Bonus.

Available from October when the furlough scheme winds down, the scheme will pay employers a one-off bonus of £1,000 for every previously furloughed employee who returns to full time employment in November. To qualify, employees must earn at least £520 per month until January 2021.

With over 9m people on furlough, the scheme could cost the treasury up to £9.4bn.

Kickstart scheme

Young people have borne the brunt of the current economic downturn. They are more likely to be employed in the badly affected hospitality and retail sectors, and youth unemployment is predicted to soar by 640,000 this year.

From this Autumn, the scheme will directly pay employers to create jobs for young people, aged 16-24, who are on Universal Credit. The scheme will cover six months of wages as well as the associated National Insurance contributions. To apply, jobs must pay at least the minimum wage for 25 hours a week. The Chancellor has initially made £2.1bn available to the scheme, with no cap on places.

Green Homes Grant

The Chancellor announced the Green Homes Scheme, which will give homeowners and landlords vouchers worth up to £10,000 to make their homes more energy efficient. The aim of the scheme is to enable homeowners to upgrade their homes with energy saving features like insulation or double glazing in order to reduce energy usage. 

The scheme kills an impressive three birds with one stone: reducing people’s energy expenditure at a time when many may be hard up, supporting job creation and helping the country meet its emissions targets.

Treasury estimates say the scheme could save people who upgrade an average of £300 per year and support 140,000 local jobs. The scheme hopes to upgrade approximately 600,000 homes across the UK and will also apply to landlords.

Support for the hospitality and tourism sectors

The hospitality sector has been hit hard by social distancing measures, with many businesses struggling to stay afloat. 

The government announced a temporary VAT cut for the hospitality and tourism sectors. Standard VAT is 20%, but the government has said it will cut VAT on food, accommodation and attractions to 5% for businesses in the hospitality sector.

 However, those of you hoping for a discounted pint or gin and tonic will be disappointed. While the lower rate applies to non-alcoholic drinks, it doesn’t apply to alcoholic ones.

The scheme could mean consumers save on meals and hotels for the next six months. 

However, there is a big “but”.  It remains to be seen whether businesses pass on the VAT savings to customers or pocket the difference themselves. 

The VAT cut wasn’t the only support for the hospitality sector. Sunak unveiled his “eat out to help out” scheme, a deal meaning people can get up to £10 off per head if they eat out Monday to Wednesday during August. 

Businesses can register for the scheme on a government website and Rishi Sunak gave some detail on how businesses can reclaim the cost. He said: “Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.”

We all have a different relationship with money. Recognising your money personality can help you better understand yours. Although no member of each group has exactly the same attitude towards their finances, researchers have identified four common attitudes towards money: Money Worship, Money Avoidance, Money Vigilance and Money Status. 

Psychologists think that our internal beliefs around money were formed by our childhood experiences, the community we grew up in and the spending habits of our family. Here is a description of the four money personalities:

Money Worship

If you’re a money worshipper, you might think that money could solve all your problems and that you can never reach a point when you’ll have enough. People who fit into this category are most likely to overspend on themselves or others and rack up credit card debts.  According to research by Creighton University, this is the most common money personality among Americans.

People who fit into this personality type might have to put some measures in place to control their spending habits. They could make a monthly budget and remind themselves to regularly check their bank balance to keep a tab on their spending.

Money Avoidance 

Money avoiders believe that they don’t deserve the money they have and try to avoid thinking about their finances. If you’re a money avoider, you might try to shift your money onto others, rather than take responsibility for making financial decisions. 

Money avoiders can benefit from setting up automatic contributions to savings accounts or speaking to a financial adviser to remove some of the responsibility around their finances.

Money Vigilance

If you’re extremely frugal and firmly believe saving for the future is the best use of money, chances are you’re money vigilant. People who fit in this category tend to derive more satisfaction from reading the interest rate on their bank statement than from buying something new. What’s more, they’re likely to prefer a conservative investment strategy and avoid financial risk.

If you fit into this personality type, you should be careful not to allow secrecy to stand in the way of better money habits. 

Money Status

People who fit into this personality type equate money with status. As a result, they may be driven to earn more money than their peers purely for the sake of earning more money. Although people who hold their net-worth in such high regard are likely to be high earners, they can be liable to make risky decisions and buy expensive things that reflect their wealth. 

If you tend to focus on “money status”, it’s a good idea to stop and think before making an expensive purchase as you could be at risk of buying things on impulse.