When will the stamp duty holiday end?

When the Covid-19 pandemic took hold and the country went into lockdown in March 2020, industry insiders called for a break on the Stamp Duty Land Tax to reinvigorate the housing market. Having come to an effective standstill for 7 weeks, housing demand hit at an all-time low, with Zoopla’s Cities House Price Index showing a 70 per cent decline. 

Relaxation of social distancing restrictions from 13 May 2020 allowed for onsite viewings and valuations to resume, which saw both the number of new properties appearing on the market and sales transactions increase. However, the incentive of a stamp duty break was seen as the most straightforward way to encourage buyer confidence and avoid a major industry slump for not only the property industry but the associated construction, home furnishings, DIY and utility companies. Even the Government itself stood to benefit, having received an £8.4 billion contribution to its coffers the previous tax year from the sales of residential properties.  

As concerns about the economic recovery from the pandemic began to grow, Chancellor Rishi Sunak announced a stamp duty holiday in July 2020. The property threshold for stamp duty was raised to £500,000 for main residence properties purchased from 8 July 2020 to 31 March 2021 inclusive, saving buyers up to £15,000. For properties priced above £500,000, buyers are only taxed on any amount over and above £500,000 during this period.  

We have certainly seen the impact on the number of properties being sold since these savings were introduced in July, with August 2020 being Zoopla’s busiest month for 5 years and bringing Righmove’s highest sales for 10 years. The Land Registry house price index has also shown a rise of 2.9% year-on-year for house prices, which were at their highest for 16 years in August according to Nationwide.  

However, despite this saving, buyers are advised not to buy a home based solely on current market trends or stamp duty incentives to avoid the potential risk of the property decreasing in value or even leaving them in a position of negative equity over the next 12 months. Indeed, the longer-term economic predictions once the stamp duty relief and other Government support schemes such as the job retention bonus for employers and job support scheme end suggest that we will see a decrease in house prices of between 5% and 14% before there is any economic growth.

And what actually happens when the stamp duty holiday ends on 31 March 2021? 

Unless the Government announce further stamp duty relief in the same way the job support scheme was introduced to mitigate the end of the furlough scheme – and we have seen no evidence to date that this is an option – we will see stamp duty tax return to the standard pre-July 2020 rates, which are as follows.   

 Unlike the temporary stamp duty arrangements currently in place, these pre-pandemic rates can vary. First time buyers (or those buying a property jointly with a first-time buyer) are subject to a discount on stamp duty and rates will also vary if the property will be mixed-use rather than solely residential. As introduced in April 2016, any home which is not classed as a primary residence will also incur an additional 3% charge to assist the affordable housing budget from 31 March 2021. 

Those buying shared ownership homes should also be aware that they will need to pay stamp duty on the total amount the property is worth, rather than the percentage they are buying, but this can be done either up front or in stages as you increase your percentage of ownership.