Time is running out for buyers to complete the purchase of their next home in England and Northern Ireland and save big on stamp duty land tax.
The nine-month tax concession, which kicked in from 8 July 2020, means no stamp duty is paid on the first £500,000 of residential property purchases as long as they are completed on or before 31 March 2021.
In Scotland, where the equivalent levy is called the land and buildings transaction tax, and in Wales, where buyers pay land transaction tax, there have been temporary tax breaks, too.
All three property taxes are set to resume to their pre-pandemic levels with effect from 1 April 2021, although it wouldn’t surprise anyone if a further extension was to be announced at the last minute.
For buyers, particularly those purchasing property in expensive areas or buying bigger homes, this spells the end of a tax saving worth up to £15,000.
Understandably, all of this has created quite the stampede in the property market with more people seeking to swap the city for the country at a time when working from home has become the norm.
Has it benefited the economy?
The surge in housing market activity over the last eight months has resulted in sector professionals, such as surveyors, solicitors and estate agents, being very busy.
That level of activity in the middle of the pandemic was reflected in HMRC’s figures for December 2020, in which residential transactions were 31.5% higher than in December 2019 and 13.1% up on the previous month.
The stamp duty holiday has also driven up house prices by 7.6% in the year to November 2020 — the highest rate since June 2016 — with the average house price at the end of last year around £250,000.
The Government's annual take from stamp duty is around £12 billion, according to HMRC. That's roughly equivalent to 2% of the Treasury's total tax take. The stamp duty holiday is estimated to cost the Treasury £3.8bn.
Will it be extended?
The property industry had urged Sunak to extend the exemption on the first £500,000 of residential property purchases, but he told MPs he needs to make “tough choices” to start restoring order to the public finances.
Then a petition, set up by a buyer whose new home will not be built before 31 March 2021, called for a six-month extension to the stamp duty holiday. It has been signed by nearly 150,000 people.
MPs debated this in the House of Commons on 1 February 2021 and confirmed the concession “was designed to be a temporary relief to stimulate market activity… and the Government does not plan to extend it”.
Speculation now suggests Sunak is considering a six-week extension to the tax break, or a compromise that would allow residential purchases to complete if they were agreed between 8 July 2020 and 31 March 2021.
Will it be replaced?
With Spring Budget 2021 around the corner on 3 March, Sunak will probably announce any extension or replacement then. There are calls on the Chancellor to scrap stamp duty completely next month.
Another petition, this time by the Fairer Share campaign, is urging the Treasury to replace stamp duty, council tax and the so-called ‘bedroom tax’ with a flat-rate payment based on a property’s current value.
The recommends introducing a flat-rate of 0.48% which would only apply to property owners, rather than tenants. Owners of multiple properties would have to pay the flat-rate on each property they own.
Whether or not a proportional property tax is announced in Sunak’s Spring Budget 2021, there’s not long to wait now.
Speak to us about property taxes.