Rishi Sunak announces stamp duty holiday extension until the end of June
Homebuyers will enjoy a tax break for a further three months after Rishi Sunak extended the stamp duty holiday until June 30 in today’s Budget.
The Chancellor responded to widespread fears of a cliff-edge drop for the property market if the initial March 31 deadline was maintained.
Instead London estate agents are today bracing for a spring stampede of homebuyers as there will continue to be no stamp duty payable on the first £500,000 of any home purchase for a further three months.
This saves home buyers up to £15,000.
Once the stamp duty holiday ends in June, the lower threshold at which buyers will start to pay stamp duty on a home will be £250,000 until September. Mr Sunak said this was to avoid a sharp slowdown in the property market. The previous lower stamp duty band of £125,000 will only be reintroduced in October.
The move comes after months of pressure from the property industry and an online petition signed by more than 150,000 people.
Mark Hayward of Propertymark said: “failed sales cost estate agents more than £4,000 per sale and consumers more than £1,500 which is why we have called on Government to rethink the stamp duty holiday timings.”
The extension will allow people stuck in lengthy backlogs for mortgages, surveys and legal reports to benefit from the tax saving.
Rightmove estimated that 45 per cent of all properties in England will now be exempt from stamp duty from July to September.
The property website expects an additional 300,000 property transactions in England could get through as a result of the extension but cautioned that new buyers who weren’t already in the process of buying a home were unlikely to meet the new deadline.
“We’re likely to see a rush of new buyers also trying to make use of the savings, but it’s worth remembering that the huge logjam will mean a new sale being agreed is still likely to take over four months on average to complete,” said Rightmove’s Tim Bannister.
How will the stamp duty holiday extension affect house prices?
House prices and sales activity hit a 10-year high through the coronavirus pandemic, fuelled by the tax break announced in July 2020.
The average London house price exceeded £500,000 for the first time ever in 2020.
Estate agent Jackson-Stops said the stamp duty holiday had increased demand with 16 buyers now chasing each available home for sale.
What does the tapering of the stamp duty threshold mean?
Previously, the minimum price at which a property became liable for stamp duty was £125,000. The amount of tax payable for buyers purchasing their sole home then increased in progressive price bands above that figure to a maximum of 12 per cent on the portion of the price above £1.5 million.
First-time buyers were exempt from paying any stamp duty on the portion of a property purchase below £300,000. This exemption will resume at the end of the stamp duty holiday on June 30.
Any other buyers purchasing their main residence between July 1 and September 30 will pay tax on any portion of the sale price above £250,000. This will start at five per cent between £250,001 and £925,000, rising to 10 per cent up to £1.5 million and 12 per cent above that. After that, buyers will pay two per cent on the portion of the sale price between £125,000 and £250,000.
Ben Taylor, CEO of estate agent Keller Williams, welcomed the plan for a tapered increase in the lower stamp duty threshold over the summer. He said: “The rabbit out of the hat of this Budget is the welcome news that the minimum threshold will increase to £250,000 until the end of September, bringing a further saving and a softer landing as the market returns to normality. This equates to a further saving of £2,500 for those completing once the main deadline has expired.”
Tom Bill, head of UK residential research at Knight Frank said: “The three-month taper until October will make any cliff-edge in June feel less steep but we would still expect a surge in activity to capitalise on the full saving.
“Ultimately, there needs to be some finality, whether in terms of the end-date or by making the holiday permanent. The housing market has exceeded expectations over the last year but it needs to revert to normal seasonal patterns of activity and a balance between supply and demand that revolves around the calendar year and not the tax year. Any continued speculation around the end of the holiday would prove more damaging for the housing market than the end itself.”