With just over a week to go until the Spring Budget, speculation is continuing as to whether the government will announce an extension to the stamp duty holiday.
The tax break, which was introduced in July last year, has brought a flurry of activity to the property market, with home movers buoyed by the prospect of saving up to £15,000.
This rise in demand has resulted in significant delays to the home buying process, and estate agents, surveyors and conveyancers are pleading with the government to extend the break beyond the 31 March deadline.
Stamp duty holiday: how does it work?
The stamp duty holiday was introduced to encourage people to move home after the first COVID-19 lockdown last year.
Stamp duty is a tax you pay when you buy a property, and it’s charged as a percentage of the purchase price.
For some buyers, this means substantial savings. The biggest cuts are on offer to those spending £500,000 or more, who can save the maximum £15,000 in tax by completing their purchase before the 31 March deadline.
- Find out more: stamp duty calculator
How has the stamp duty cut affected the market?
There’s no question that the stamp duty cut has resulted in greater demand and higher house prices.
Provisional figures from HM Revenue & Customs show that 129,400 transactions went through in the UK in December – compared to 87,040 in 2019 and 83,880 in 2018.
Meanwhile, data from Rightmove shows that the average number of days it took to sell a property fell to just 49 in November, compared to 67 a year earlier.
When it comes to house prices, figures from the Land Registry showed an 8.5% year-on-year rise in December.
The property portal Zoopla says that by the time the stamp duty break ends, it will have helped 740,000 buyers.
It says 600,000 buyers who agreed a purchase from May 2020 onwards won’t have to pay any stamp duty – saving an average of £4,660 – while a further 140,000 buyers purchasing homes for £500,000 or more will save the maximum of £15,000.
- Find out more: coronavirus and house prices
Industry calls for stamp duty extension
In November, a group of 14 trade bodies wrote to the Chancellor asking for the holiday to be extended by at least six months.
The government was unmoved by this request, but an online petition for an extension then gained more than 100,000 signatures, resulting in MPs debating the prospect in early February.
Zoopla says that as many as 70,000 sales that were agreed in 2020 are in danger of missing out on the break if it isn’t extended beyond 31 March.
Will the government extend the stamp duty break?
At this stage, it looks highly unlikely that there’ll be any significant extension to the stamp duty cut – but it’s possible that the government might taper the deadline to avoid too many deals falling through.
The latest rumour is that we could see a six-week extension to the relief, which would allow buyers who’ve already agreed a purchase a little longer to get it over the line.
Rightmove says a six-week extension would mean the majority of people who agreed a purchase before the end of 2020 will be able to complete before the deadline.
With the clock ticking down, it’s increasingly likely that any further extension won’t be announced before the Spring Budget next Wednesday (3 March), meaning all eyes will be on the Chancellor’s speech for an update.
Is it too late to benefit from the stamp duty cut?
If you’re currently looking for your ideal home, it’s highly unlikely that you’ll be able to get your purchase over the line by the end of March – and even a short extension is unlikely to suffice.
But don’t worry – there’s a decent chance you won’t be any worse off.
For example, if you’re a first-time buyer in England or Northern Ireland, you already have a £300,000 tax-free threshold, so unless you’re buying in an expensive area such as London, you wouldn’t have needed to pay stamp duty anyway.
And if you’re a home mover stepping up the ladder, the end of the tax break could be a good time to grab a bargain.
The stamp duty holiday has seen the price of detached homes increase at a rapid rate, and this is likely to mean that some buyers may have overpaid significantly in an attempt to cut their tax bill.
With this in mind, hanging on and waiting for the market to calm down could be a fruitful move in the long run.
- Find out more: step-by-step guide to buying a house
Which? Money Podcast: buying a home in 2021
The property market might be flourishing, but the truth is there’s still a lot of uncertainty around – especially when it comes to mortgage availability and the future of house prices.
In this week’s Which? Money Podcast, we talk through all of the big issues facing home buyers in 2021, and speak to Zoopla’s head of research Gráinne Gilmore to get the inside track.
You can listen to the full episode by clicking the link below.
This article was first published on 8 November 2020. It has since been updated to reflect the latest news around the stamp duty holiday. The most recent update was on 22 February 2021.