Rishi Sunak Likely To Extend Stamp Duty Holiday
Chancellor Rishi Sunak is expected to announce an extension of the Stamp Duty Land Tax (SDLT) holiday in the Budget on 3 March 2021.
Confirmation of an extension will be welcomed not only by purchasers and sellers but estate agents and Residential Property Solicitors.
There are serious concerns about the stability of the property market, with experts predicting that the mini-housing boom experienced over the past six months will quickly fizzle out as the economic realities of the Coronavirus pandemic start to bite.
However, some question whether extending the SDLT holiday is simply delaying the inevitable and falsely inflating the property sector, especially as the Office for Budget Responsibility has forecast unemployment will hit 7.5% by mid-2021.
At present, more than 200,000 house buyers risk their transaction not completing by 31 March 2021 when the SDLT holiday is scheduled to end.
The fact that a possible extension of the SDLT holiday has been widely reported is a strong indication that it will happen. However, one thing this pandemic has taught us is that things can change very quickly. Therefore, it would be unwise to make any plans that involve financial commitments on the back of such media reports.
What is the SDLT holiday and when was it introduced?
To ensure the property market did not collapse following the first lockdown in March 2020, the Treasury raised the SDLT threshold from £125,000 to £500,000 for property sales in England and Northern Ireland, effectively creating a stamp duty break for all but the most expensive houses.
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 milion | 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% |
The SDLT holiday was announced in July 2020 and resulted in a surge in market activity. The Centre for Policy Studies reported that house sales had increased to their highest level since before the 2007 financial crisis.
Announcing the holiday, Mr Sunak said:
"House prices have fallen for the first time in eight years and uncertainty abounds in the market, a market we need to be thriving.
"We need people to be feeling confident - confident to buy, sell, move and improve. That will drive growth, that will create jobs. So, to catalyse the housing market and boost confidence, I have decided today to cut stamp duty.”
Why is the housing market so important?
It cannot be underestimated how vital a strong property market is to the overall economy. For most people, their home is their most valuable asset. Therefore, when property prices are high, people feel confident enough to spend more money. When house values fall, owners reduce their spending and save.
As the economic consequences of the Coronavirus pandemic begin to bite, the vulnerability of the property market, given an artificial boost by the SDLT holiday, will be clearly exposed. However, extending the SDLT holiday until June merely delays the problem for another three months. Therefore, the Treasury may extend the holiday only for those at a specific stage of the sale and purchase transaction, for example, parties who have exchanged contracts. Alternatively, the tax relief amount may be slowly reduced over the coming months, with the hope that the vaccine rollout, coupled with the and easing of lockdown restrictions, will ensure stability in the property market.
If you are concerned about your property sale and purchase transaction or want to know more about the SDLT holiday or possible extension, please get in touch.
Our team can advise and represent buyers and sellers in all aspects of residential property sales and purchases. For a free consultation please call us on 0208 300 6666.
Turning point in house price boom as growth slows to lowest rate in six months (telegraph.co.uk)
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