You are here: Home - Mortgages - First Time Buyer - News -

Budget 2021: Stamp duty holiday extended until June with tapering end date

0
Written by:
03/03/2021
The government has extended the current Stamp Duty Land Tax (SDLT) holiday until 30 June after which the nil rate threshold drops from £500,000 to £250,000 until October.

In today’s Budget, Chancellor Rishi Sunak said the additional step down of the nil rate threshold, before it is lowered to its normal level of £125,000, was to smooth the transition”.

Sunak said: The housing sector supports over half a million jobs. The cut in stamp duty I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time. But due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March. 

So I can announce today the £500,000 nil rate band will not end on the 31st of March, it will end on the 30th of June.”

He added: “Then, to smooth the transition back to normal, the nil rate band will  be £250,000, double its standard level until the end of September, and it will only return to the usual level of £125,000 from October the first. 

Calls for extension

The SDLT relief threshold was originally raised to £500,000 in July 2020 and the holiday was planned to end in March this year.

This resulted in record high transaction levels last year. The increased demand caused average house prices to exceed £250,000 for the first time. 

The housing market was already trying to catch up with those transactions that were put on hold during the first lockdown. The stamp duty holiday piled more pressure on the sector which resulted in delays in mortgage offers being approved and completions agreed.

Fears that transactions started in January would not make the deadline led to a petition calling for a six-month extension, despite warnings from the housing minister Christopher Pincher that there were no plans to extend the tax break.  

A potential extension was then debated in Parliament last month when the petition reached 100,000 signatures. At the time, MPs suggested a phasing out of the policy or an allowance for those who had already exchanged contracts. 

During the debate, Jesse Norman, financial secretary to the Treasury, said the policy had worked and acknowledged that it had helped to boost activity in the market. However, he refused to comment on any tax decisions outside of a fiscal event. 

A three-month extension to the stamp duty holiday was later speculated following media reports but this was criticised by the industry amid concerns it would create a second cliff edge and push existing issues down the road. 

Added pressure and lower savings

Originally, Rightmove estimated that if buyers were given six extra weeks to transact it would allow 120,000 and 160,00 additional transactions to benefit from the tax holiday and save buyers up to £1bn.

However, the lowering of the nil rate threshold to £250,000 after the three-month extension will not provide the same generous savings.

Lucian Cook, director of residential research at the firm, tweeted: “Let’s just get this in context; a £250,000 stamp duty land tax holiday post-June saves a maximum of £2,500; somewhat less than the maximum saving of £15,000 currently available.” 

As well as this, some industry professionals have warned that the extension could result in further delays to transactions and put more pressure on the property sector.

Mike Scott, chief analyst at estate agency Yopa, said: The government should consider the additional load this will place on the conveyancing industry, which may even prevent some of the existing purchases from completing by the new deadline despite the extra time, frustrating home buyers who have been ready to go for some time.

We would like to see a measure in place to ensure that those sales that were already in the process before this extension was announced will be prioritised.

Rob Clifford, CEO of Stonebridge Group, added: “Whilst we naturally welcome a busy market, we still appear in danger of having thousands of transactions not completing before this new deadline, which will hurt consumers, and exacerbates the risk of aborted sales, at great cost to both consumers and the wider economy.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and the fresh round of walkouts take place tod...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week