The Covid-19 pandemic has had a tragic impact on the country. While the health effects have rightly hit the headlines and may be with us for a long time to come, the economic damage is also very real. One of the measures the government has used to help stimulate the economy has been the introduction of a stamp duty holiday. This is to help keep the housing market, and all the businesses around it, moving.
Why have a stamp duty holiday?
The stamp duty holiday was a temporary measure, introduced following the first national lockdown in 2020. Intended to run for nine months; the scheme was intended to keep house sales going by, effectively, offering a discount on residential property payments.
Before the stamp duty holiday, duty was payable on any property over £125,000. Although for first-time buyers this limit was £300,000. During the holiday period this was raised for all buyers to £500,000. This meant that buying a house worth £500,000 or more would save the buyer £15,000 compared to the old rates.
The average house price towards the end of 2020 was just under £250,000. This meant that many people were avoiding having to pay any stamp duty at all. Indeed, it’s estimated that about 90% of house purchases during the stamp duty holiday avoided paying any duty at all.
The future of the stamp duty holiday
The holiday is currently scheduled to end on 31 March 2021. There are already calls for it to be extended. Both politicians and industry bodies believe that the holiday has helped keep the economy moving, not just by supporting the businesses involved in house-moves, from estate agents and surveyors to removal companies, but also by maintaining confidence in the economy. House prices, (for good or bad), are often seen as a measure of economic health so many people feel more confident when they are rising.
The move has had some criticism, though. Some people believe that although house prices have continued to rise during the pandemic, at least part of this is down to the stamp duty holiday. The argument is that sellers, recognising buyers are saving significant sums on stamp duty, are simply increasing their prices so they get to share some of it. Average house prices increased by 7.6% in the year to November 2020, which gives some weight to the argument given the otherwise very gloomy economic news.
The holiday’s over?
Perhaps, the biggest argument against a continuation of the holiday is that it costs the Treasury a lot of money. It’s estimated the current holiday will cost the government nearly £4 billion. The Chancellor, trying to balance the books with less money coming in and an expensive pandemic might be reluctant to continue any giveaways. Especially if the housing market seems to be buoyant anyway.
While an extension is possible, if you want to take advantage of the stamp holiday duty then move quickly. It’s due to end on 31 March, so time is tight for you to complete before it ends. The good news, though, is that everyone in a housing chain will want to take advantage of the holiday, so there’ll be a big incentive for a smooth transaction.