Should the stamp duty holiday get extended?

Stamp duty is a tax levied on single property purchases. Currently, if you are buying your main property in England or Northern Ireland before 31st March 2021, you will not have to pay the Stamp Duty tax on properties costing up to £500,000 – no matter if you are a first-time buyer or you have previously owned a property before.

There are multiple rate brands for stamp duty. The tax is calculated on part of the property purchase price, and this falls into a certain band.

The global pandemic, COVID-19, affected many financially. Jobs were lost or furloughed, and many struggled to pay their rent or mortgages. To support those wanting to buy properties, the Chancellor of the Exchequer, Rishi Sunak, announced on the 8th July 2020 that there would be a temporary stamp duty holiday until the 31st March 2021. This holiday saw stamp duty rates cut to zero for all properties £500,000 or under, offering a saving of around £15,000.

The stamp duty holiday has been welcomed by first time buyers and also those downsizing, with a huge saving. It has also helped all the other complimentary industries including property developers, mortgage brokers, solicitors, estate agents and surveyors – who were looking to make up for lost earnings during the first lockdown in Q1 and Q2 of 2020.

The stamp duty holiday has been majorly important for the British economy in that it has helped to revive demand for purchasing properties, and many are fearful that the end of the holiday will leave some buyer’s stuck in a ‘no man’s land’.

Many who hope to benefit from the stamp duty holiday are fearful that it will not last long enough for them to complete their home purchases. Paperwork and conveyancing are lengthy processes and may extend past the 31st March cut-off point.

While it has been said the Chancellor is considering an extension to the holiday, there are no formal plans just yet to do so. 14 trade bodies have called on the Chancellor to grant a stamp duty holiday extension, especially since the cut-off date could actually cause certain purchases to fall through, and thus consequently cause potential collapses to property chains. This would certainly have a negative impact on the housing market.

Currently 412,000 sales agreed in 2020 remain in the length legal process. According to Rightmove says a six-week extension from 31st March onwards could benefit around to 120,000 to 160,000 sales going through, meaning that buyers could save £1 billion on the stamp duty tax. Critics of an extension argue that it may add new buyers to the market, and cause a never-ending cycle.

Risihi Sunak is likely announce the decision on a further stamp duty holiday on the 3rd March