Opinions and insights from our Property team
Stamp Duty Holiday Extended to 30 June
The Stamp Duty holiday in England and Northern Ireland has been extended to 30 June 2021, after it was initially scheduled to be finishing at the end of March.
Following a difficult period for the housing market, Chancellor Rishi Sunak confirmed that Stamp Duty Land Tax relief would continue for property purchases up to £500,000. A ‘tapered’ extension on homes up to £250,000 would also last until the end of September 2021.
In Wales, the Land Transaction Tax is also being extended to 30 June 2021, while in Scotland there has been no announcement regarding an extension to the Land and Buildings Tax holiday, which is still set to conclude at the end of March 2021.
Why has the Stamp Duty holiday been extended?
Under normal circumstances, Stamp Duty falls on property purchases over £125,000, with the exception of first-time buyers, who get relief on purchases up to £300,000. This tax-free allowance is called the nil-rate band.
Following the outbreak of the COVID-19 pandemic in 2020, the housing market was severely hit, as property purchases dropped to alarming low levels. In response, Rishi Sunak introduced a temporary holiday and raised the nil-rate band to £500,000 for all buyers, providing an added incentive to prospective buyers in England and Northern Ireland who were on the fence.
The holiday had the desired effect. After it was introduced, residential property transactions rose by 14.5% followed by a further rise of 15.6% in August. Average house prices also increased by 8.5% in the year to December 2020, which was the highest annual rise since 2014.
However, the relief was never intended to be permanent and was originally set to come to an end at the end of March 2021.
The looming deadline meant that the market slowed down in January 2021, as many people realised that they would be unlikely to reap the benefits of the deadline if they started a property purchase.
It also became clear that many buyers who were already in the middle of a property transaction would be at risk of missing the deadline, often for reasons that were out of their control, such as delays further along the property chain.
This ‘cliff edge’ put around 100,000 transactions at risk of receiving a surprise Stamp Duty bill, which lead to widespread criticism from industry experts who called for an extension that included a separate tapered deadline.
What does the Stamp Duty holiday mean for buyers?
Until 30 June 2021 anyone making a property purchase up to £500,000 will be eligible for 100% Stamp Duty relief i.e. they will pay no Stamp Duty.
From 1 July and 30 September, there will be no Stamp Duty to pay on properties valued up to £250,000.
From 1 October 2021, the tax-free allowance will revert back to £125,000.
What effect will the Stamp Duty holiday have?
Given how effective the Stamp Duty holiday was at reinvigorating the housing market during the height of the pandemic, it is hoped that this extension will have a similar impact.
The extension could save around 300,000 property purchases in England. Even more the extension was announced, the market had already begun to respond to the rumours of an extension, with house prices increasing by 0.7% during February.
The positive impact on the housing market may be improved further by the introduction of a new mortgage guarantee scheme in the Spring Budget. Under the scheme, the government will agree to back 95% of mortgages, which should encourage lenders to bring low-deposit mortgage products back to the market.
This should be of use to first time buyers. They do not benefit from the Stamp Duty holiday as they are not required to pay Stamp Duty under normal circumstances.
Get expert advice about buying a home in 2021
At Roythornes, our team of specialist conveyancing solicitors regularly lend their expertise to a wide range of residential property matters and can work alongside you to help complete your property transaction.
Our team will put their combined experience to good use, helping to make your property transaction as straightforward as possible. We can provide specialist advice in relation to the Stamp Duty holiday and current COVID-19 restrictions, keeping you updated at all times if there are any additional changes to the existing timelines.