Will the Stamp Duty holiday be extended further?

Will the Stamp Duty holiday be extended further?

65% of movers want the tax break to continue…

If you’re wondering about the new Stamp Duty holiday deadline, and the effect it is having on the property market, you’re in the right place… 

The housing market has continued to defy expectations over the past year, fuelled by people’s desire to move to homes with gardens and with space to work from home. All of these moves have been boosted by the Stamp Duty holiday. The nil rate band of £500,000 will end in June 2021 and will then be tapered until the end of September in order to smooth the transition back to the usual rates.

There was worry that many homebuyers would not complete their purchases in time if the holiday was not extended beyond the March 31 deadline. There is still a concern. In fact, 62% of home movers are still not confident they will complete their move in time for the June deadline (Countrywide data). And more than half of home movers think the Government could have done more to support movers.

We outline the current tax changes, discuss what the implications of the end of the holiday will be on property sales, as well as whether Stamp Duty should be scrapped altogether. 

What is Stamp Duty?

Stamp Duty Land Tax (SDLT) is the tax that must be paid when you purchase a property. The amount of money required for Stamp Duty depends on the overall price of the property as well as factors like whether it is residential or non-residential and whether or not you are a first-time buyer.

How much would you usually pay in Stamp Duty?

If the property is worth between £125,001 and £250,000, the Stamp Duty land tax rate is 2%. So if the property was valued at £250,000, you would have to pay an extra £2,500 in Stamp Duty tax. For the next £675,000, the rate is 5%. If the property you were purchasing was valued between £250,001 and £925,000 bracket, you would not pay any Stamp Duty on the first £125,000, but would pay a 2% rate on the next £125,000 and would pay a 5% rate on the following £675,000. So, as you can see, the tax charges add up. Under the extension, there is absolutely no stamp duty tax on homes up to £500,000. The next portion of the property's price (£500,001 to £925,000) will be taxed at 5%, and the portion after that (£925,001 to £1.5m) at 10%. The table below demonstrates what the current legislation means for homebuyers. 
 

House price Stamp duty rate previously Stamp duty rate until 30th June Stamp duty rate from 1st July - 30th September
Up to £125,000 0% 0% 0%
£125,001 - £250,000 2% 0% 0%
£250,001 - £925,000 5% 0% up to £500,000. 5% between £500,001 - £925,000  5%
£925,001 - £1,500,000  10% 10% 10%
>£1,500,001 12% 12% 12%


 

House price example

Stamp duty 
£125,000 £0
£250,000 £2,500
£350,000 £7,500
 £500,000  £15,000
£925,000 £36,250


Will the Stamp Duty holiday be extended further?

Across the property industry, there are now growing calls for the deadline to be extended. There has been unprecedented demand in recent months with more buyers registering their interest than ever before. We have seen over a 500% uplift in website visitors compared to this time last year (Countrywide Research) and Rightmove recently reported the average UK house price is £333,564, the highest ever. 

Naturally, this has left large swathes of the public with delays and sadly, frustrations. To gain a better understanding, we surveyed movers from across the UK about their experiences during the Stamp Duty holiday and the results were very interesting… 

52% said they had been encouraged to move by the Stamp Duty holiday extension

62% are no longer confident they will complete their move before the deadline

65% think the extension should be longer

20% say a lack of desirable homes to purchase delayed their move

31%  said issues within the property industry caused them to be delayed

51% think the government could have done more to support movers

And here’s what they had to say when asked ‘what could have been done to speed up the delays?’ 

Apply restrictions consistently across England and Scotland

Extending the stamp duty holiday or removing it completely will ease pressure on the industry and solicitors. The government has already proved that the Stamp Duty isn't a necessity to the economy by allowing for a holiday in the first instance

Honour the stamp duty holiday for those already at the final stages of the purchase

More help for first-time buyers. Stamp duty holiday has only helped those already on the housing market

Our vendor is still looking for a property to buy

Speed up land search

More houses on the market for our price range. Houses are very expensive and since the stamp duty holiday was introduced all of the prices went up 

Extend the deadline

Quicker searches, not allowing gazumping

What will happen when the Stamp Duty holiday ends?

It is always difficult to predict the impact of any one measure on the property market, the stamp duty holiday could bring a fall in property prices.

As things stand, September also marks the end of the furlough scheme and job losses could rise, which could also slow the market and cause prices to drop. Rightmove believes that we may witness a small slump once the Stamp Duty cut is removed, house prices will still rise by 4% over 2021.

Although there is no clear consensus, one thing is for sure. If you are really looking to sell, coming to market now gives you the best chance of getting the price you want. 

Should Stamp Duty be scrapped altogether?

For people moving home, the Stamp Duty tax has become notoriously unpopular and, in recent years, several leading economists have spoken out against it, citing it as counterintuitive as it prevents people from moving to secure better-paid work, older generations from downsizing and homeowners from climbing the property ladder.

Currently, the Government has not expressed plans to scrap the tax, however, with a new focus on getting younger people onto the property market, perhaps this will change in the not so distant future... 

Struggling to buy your dream home?