There is plenty of speculation that the Chancellor, Rishi Sunak, is contemplating an extension of the Stamp Duty Holiday which is currently due to expire on 31 March. This suggestion was first made in The Telegraph earlier in the week. If Mr Sunak does decide on a six-week extension, it could affect 120,000- 160,000 home buyers who are currently buying property and concerned that they will not meet the current deadline.
Costly for the Government
If the six-week extension is confirmed, it would come as great relief to home buyers as it is currently taking on average 135 days to complete on a property. The reason for the hold-up is that the Stamp Duty Holiday has brought a boom to the property market since the end of the first lockdown last summer. The boom continued into December and January 2021. The Chancellor is said to be personally against the extension as he feels that it would be too costly for the government. It is rumoured that it could save home buyers and cost the government £1bn.
Great Saving for Home Buyers
The Stamp Duty Holiday was first introduced on 8 July 2020 to give a boost to the property market and has proved to be more popular than predicted. The tax break means that home buyers do not have to pay Stamp Duty on properties valued at £500,000 or less. Main homes valued between £500,001 – £925,000 will pay stamp duty only on the amount above £500,000 and this is payable at a rate of 5%. Any property costing between £925,001 – £1.5 million is taxed at a rate of 12% for the amount in excess of £500,000.
In reality, this means a house buyer can currently save £5,000 on a property costing £300,000 and £15,000 on a property with a price tag of £500,000. When he announced the tax break, Mr Sunak suggested that nine in ten house buyers would benefit from the Stamp Duty Holiday and not pay any tax.
So far, 740,000 people who agreed their property sales between May and December 2020 have already taken advantage of the tax break, or will be able to do so before the current deadline of 31 March 2021.
But Time Is Running Out
In reality, the Stamp Duty Holiday has brought such demand that there are many delays for home buyers. As thismoney.co.uk explains –
‘Buyers have found themselves trapped in conveyancing and mortgage application bottlenecks as hundreds of thousands race to complete by 31 March’.
Rightmove Has stated if there is a six week extension, most of the house sales that were agreed in December 2020 would be completed in time to take advantage of the Stamp Duty Holiday. If the tax break is not extended however, Rightmove estimates that up to 100,000 home buyers could be faced with paying the Stamp Duty Tax. The main reason that Rishi Sunak introduced the tax break last July, was to temporarily stimulate the housing market – which it has certainly done and driven house prices up in many areas.
Miles Robinson, who is head of mortgages for the online mortgage broker Trussle, has said that the tax break has meant an unprecedented demand for mortgages even in what are traditionally low months for the property market –
‘We’ve seen a 63% increase in mortgage applications in December and a 15% increase in January, when compared with the same periods last year’.
Even if the Chancellor extends the Stamp Duty Holiday, house buyers who are just agreeing on properties now, face difficulty in completing in time. Cash house buyers such as us, House Buy Fast, are proving a popular way for home buyers to achieve a quick house sale and in many cases, avoid applying for a mortgage, as they have the cash for the property they are buying.