July 2020 saw Rishi Sunak, Chancellor of the Exchequer, announce a Stamp Duty holiday to encourage the reignition of the housing market. Covid-19 and the resultant lockdowns saw house buying and selling starting to dwindle, even as measures were gradually lifted, meaning that something needed to be done to improve the housing market. With pressure building on the run-up to the original deadline, the government have recently announced an extension to ease the fear. Here’s what we know, and what it could mean for buyers.
What Is The Stamp Duty Holiday?
The Stamp Duty Holiday first introduced in July 2020 saw all homes up to £500,000, or the first £500,000 of the value of a house, exempt from Stamp Duty. This holiday was designed to give the housing market a much-needed boost and encourage people to continue buying and selling homes. With the country adjusting to a new way of life, fear and inconvenience meant that the majority of people looking to move chose to hold off on their decisions. To trigger the market back into action, the stamp duty holiday was designed to offer better accessibility to homes for buyers across the country.
Stamp Duty Land Tax, in standard times, applied to buyers of residential properties in England and Northern Ireland for values over £125,000. For first time buyers, the threshold for tax was slightly higher, at £300,000. Tax was issued on the total amount at anything between 2% and 12% rates, depending on the amount paid.
The holiday meant that buyers could save anything up to £15,000 when buying a new home, and it certainly worked – house prices rose significantly over 2020, with the Office for National Statistics reporting rises of up to and around 7.6% annually, however, there was an incredible 34% rise in overall property transactions in the UK in December 2020 alone.
Why Is It Being Extended?
In his latest budget, Rishi Sunak announced that the deadline for the Stamp Duty holiday would now extend past the original March 31st 2021 deadline, to June 30th 2021. Fears were expressed by buyers that they could be caught out with the original deadline, potentially causing thousands of sales to fall through with the holiday ending. As a result, the holiday has been extended by a further three months, after which it will be tapered off until September 30th 2021 – this will see amounts of up to £250,000 untaxed between June 30th and Septemeber 30th.
Who Could Benefit From the Extension?
Both buyers and sellers should be relieved by the news, particularly those in the middle or just starting sales. The extension removes any jeopardisation for both parties that would have been no fault of their own, and the tapered end will help to ease the UK out of the holiday without any sudden ending. For buyers or sellers who have been stuck in the process, the approaching deadline loomed over them but with this extension, the fear can be relieved.
Alongside the relief for existing ongoing sales, it could encourage more people to head out into the housing market and get their foot on the property ladder. Those who were unsure about buying can go ahead and start the process with the peace of mind that there are another 3-4 months in which it can play out.
How Could This Affect The Housing Market In Spring?
As you might expect, this extension is likely to have an effect on both the spring, and summer housing markets, but the question lies in just what that effect might be. Prior to the extension, the potential for extreme pressure in the market over spring was high. Demand for housing was high through November and December, with mortgage approvals reported to have risen over 1.83% in November compared to the previous month. While this was still low compared to previous years, the rise was a sign of improvement in the housing market but resulted in pressure.
Spring could see similar activity, but reduced pressure on buyers and sellers thanks to the extra time available. The extra months, as well as the transition period, offer both parties the time and opportunity to complete existing sales, as well as encouraging those dubious about buying due to the deadline, to make that purchase.
For further advice or a quote, or If you’re looking to buy a house to rent in the future, get in touch with our team to find out more about our Landlord Insurance. Taking advantage of the extended stamp duty holiday offers the perfect opportunity to save yourself some money.