According to The Times yesterday (24th February) Rishi Sunak is going to extend the current Stamp Duty Land Tax (SDLT) holiday by an additional three months. The threshold for paying stamp duty on residential properties in England and Northern Ireland is set to reduce from its temporary level of £500,000 to £125,000 on 1st April 2021.
The three month extension could allow those who are currently progressing through the purchase process to complete without the sudden cost increase. The purchase process is currently taking far longer than is usual as a result of COVID restrictions, and its thought the return to the usual, higher stamp duty levels would severely impact the housing market.
A recent study by the Centre for Policy Studies (CPS) reported that the tax break had prompted an increase in house sales to their highest level since the 2007 financial crisis. The think tank reported the number of transactions increased from 132,090 in Q2 last year to 225,870 in Q3 and 316,300 by the end of Q4, with 87% of people buying a primary home having no SDLT to pay thanks to the holiday.
The CPS has called on the Government to either permanently raise the threshold, or abolish SDLT altogether.
Jethro Elsden, data analyst at the CPS, said: ‘The introduction of the stamp duty holiday last July did not just rescue the housing market and construction sector, but proved conclusively that high stamp duty rates have become a damaging drag on the economy, the housing market and people’s aspirations.’
The CPS has not been alone in its calls for an extension. There has been a fierce campaign for it by property agents, commentators and economists.
The Building Societies Association (BSA) says that with the 31st March ‘cliff edge’ deadline fast approaching many buyers and sellers, who have already agreed sales and have mortgages approved, would be unlikely to complete the transaction within the deadline.
They therefore believe that a tapered end would allow any house purchase where the mortgage approval has been granted by the end of March, an additional three months to complete while still benefiting from the rate reduction. They argue that in addition to supporting homebuyers who are likely to have budgeted based on the Stamp Duty saving, a taper of that length would also ensure that lenders and conveyancers could manage operational pressures in a Covid-secure way.
We shall see what Rishi Sunak thinks next week!