The temporary Stamp Duty holiday has been extended in an attempt to keep the property market active.
In June 2020, the chancellor Rishi Sunak announced a temporary Stamp Duty holiday, cutting the rate of the tax on purchases of up to £500,000 to zero.
The current rate of 0 per cent payable on the first £500,000 will continue until 30 June 2021. From then until 30 September 2021, the rate will be 0 per cent on the first £250,000, returning to the pre-holiday rates from 1 October 2021.
While buyers may be disappointed to miss the opportunity to buy with lower expense, the fact is that for many the savings were not large. The overheated property market with inflated prices may mean that many were paying a similar amount as they would have done before in any event.
The Stamp Duty holiday savings
The standard (pre-holiday) rates are 2 per cent on the part of the price from £125,000 to £250,000 and 5 per cent on the part of the price from £250,000 to £925,000.
For those buying a property worth £500,000, there is a saving of £15,000, however looking at the average house price of around £250,000, the saving is only £2,500.
The effects of the Stamp Duty holiday on the property market
The tax break stimulated the property market excessively, with Nationwide reporting a 7.3 per cent average rise in house prices in the year to December 2020. People deciding during lockdown that they wanted to move to a different, more suitable home also contributed to the figures.
Mortgage approvals were also up, with more in 2020 than the previous year, despite lockdowns and related disruption.
The dramatic increase in attempted moves has resulted in a substantial slowing of conveyancing times as mortgage lenders and local authorities struggle to deal with increased workloads while also coping with staff working remotely and absences.
The end of the Stamp Duty holiday
If you don’t manage to buy before the October cut-off date, the news isn’t all bad. Most property groups are anticipating a slump in the market following the end of the Stamp Duty holiday. As well as lower property prices, this may offer buyers a better chance of securing a home as competition falls away.
The overstretched local authorities and mortgage lenders will be able to function more quickly and transactions should therefore go through in a shorter time.
Criticisms of the Stamp Duty holiday include the fact that the wealthy were helped more than lower income families, with those buying properties priced above average saving the most. Those buying properties at below average prices saved less, while those in rented accommodation did not benefit in any way.
With high property prices, the biggest loser has been the Treasury, with the first nine months of the Stamp Duty holiday costing an estimated £3.8 billion. Reintroduction of the tax towards the end of the year will remove the artificial inflation of the property market.
If you are thinking of buying or selling a property and you would like to speak to one of our expert lawyers, ring us on 0345 2413100 or email us at mail@cplaw.co.uk
