Chancellor Rishi Sunak announced his stamp duty holiday last July, with the aim of helping the UK’s property market to keep moving by making transactions a bit cheaper.
Initially, the holiday was set to end on March 31, but it’s been extended twice, with a staggered return planned to start at the end of June until September 30. When October rolls around, stamp duty levels will return to their pre-covid settings, which usually raise around £12 billion for the Treasury each year.
The stamp duty holiday settings
In reality, it’s not so much a holiday as a significant raising of the thresholds at which the various rates apply.
Until July 1, there’ll be no duty on the first £500,000 of a property transaction, with a 5% levy being imposed on values from £500,001 to £925,000.
From £925,000 to £1.5 million the levy is 10% and anything above £1.5 million is taxed at 12%.
From July 1 to October 1, there’ll be a staggered return to old levels, with the duty kicking in at £250,000 rather than its usual £125,000. Anyone hoping to take advantage of the holiday will need to complete their transaction by September 30.
A rush to complete
Many house buyers are scrambling to complete their purchases before the stamp duty holiday ends completely as the savings can run into several thousands. For example, someone completing the purchase of a £400,000 house will pay £7,500 if they complete in July, but they’ll pay £10,000 if the transaction runs into October.
Some vendors and buyers are trying to get around these potential increases by accepting conditional offers that will reduce slightly if the transaction misses the deadline. However, as it’s effectively the vendor paying for the stamp duty in these circumstances, many are raising their asking prices to make up for it, which defeats the object somewhat.
Steep rises in house prices
The stamp duty holiday has, according to many estate agents, been a contributing factor in the fastest rise in property prices since 2004, with prices being 7.1% higher than they were in April 2020. Buyers are prepared to pay an extra few thousand for a place if they know they’ll be saving up to £10,000 or more in stamp duty.
This extra confidence has actually led to a shortage of housing stock in the market, which only drives up prices further. Even though the holiday is being phased out, buyers can still save quite a bit, so this means we should see a steady and buoyant property market until October at the least.
