With the current stamp duty holiday deadline looming, Rishi Sunak is rumoured to be extending the perk beyond the March cut-off date. So what could this mean for the property market? And how can you take advantage? Here, we take a look at everything you need to know.
What is a stamp duty holiday?
Stamp duty is a tax paid by property buyers. The value depends on where you are in the UK and the price of the property. In a bid to protect the housing market from the effect of the Covid-19 pandemic, the government has temporarily tweaked the stamp duty threshold to £500,000 for main residence property sales (in England and Northern Ireland) until 31 March 2021.
But that’s not all – as well as benefiting from stamp duty free purchases on properties below £500,000, buyers with a bigger budget can still make significant savings as pricier homes will only be taxed on their value above that amount. Plus, landlords and second-home buyers are also eligible for a tax cut, but they will still need to pay the additional 3 per cent stamp duty they would normally be charged.
How much could you actually save?
Although buyers can save as much as £15,000 if they are buying a property of £500,000 or more, in reality, the average stamp duty bill is cut by a slightly more modest £4,500. Nevertheless, nine out ten buyers now pay no stamp duty at all, so plenty have still benefited greatly.
How much has the stamp duty holiday cost Rishi?
Pre-Covid, the Government pocketed an estimated £12 billion a year from stamp duty tax – that’s roughly two per cent of the Treasury’s total tax income. The (so far) nine-month stamp duty holiday has made a significant dent in this, reducing the sum by a hefty £3.8 billion.
When will the stamp duty holiday be extended to?
Rishi Sunak is expected to announce any plans to extend the stamp duty holiday on 3rd March 2021 in the March Budget. It is thought that he will keep the policy for three more months, meaning a new end-of-June deadline will be put in place.
Is the stamp duty holiday good news for the property market?
In theory, yes. The tax cut was designed to boost property sales during lockdown after house prices had fallen for four consecutive months. It was also hoped the move would help buyers who have taken a financial hit because of the Covid-19 crisis. So far, its proven to be an effective way to protect the housing market, with the average asking price climbing by 8.5 per cent in 2020.
But not everyone thinks that continuing the holiday is a good idea. Critics have warned it will encourage people who were planning to buy later on to accelerate their plans, potentially leading to a dramatic slump in demand when the tax break finally comes to an end. Ultimately, we could be left with a very stagnant housing market come autumn.
Before you rush to put your place up for sale, be aware that there is currently a big backlog in the conveyancing process caused by the sudden influx of buyers. This means that even if you find your dream next home before the stamp duty holiday ends, you may not complete in time to actually qualify for the tax cut. Therefore, anyone looking to buy before June should still be prepared to pay stamp duty should time unfortunately run out.