When you buy a home or a piece of land in the UK, a percentage of the property price is to be paid as ‘stamp duty’. Generally, no stamp duty is levied on properties that are £125,000 or under.
However, in July of last year, Chancellor Rishi Sunak had announced that the stamp duty threshold will be raised from £125,000 to £500,000 until 31st March 2021. This period of tax exemption became known as ‘Stamp Duty Holiday’. The goal was to boost the housing market in the UK which suffered a huge blow due to the lockdown.
Stamp duty holiday has undoubtedly boosted the housing market in the UK. For example, 140,000 more people were buying homes in December 2020 compared to the number of people buying homes in December 2019. According to Zoopla, 418,000 are currently in the process of buying a home.
Appeal to extend holiday
Since stamp duty holiday will come to an end in March of this year, people are rushing to close purchases in order to escape stamp duty. However, experts claim that if the holiday is not extended, about one-third of house sales will collapse at once.
Tory backbenchers have even launched a campaign to make stamp duty holiday permanent, claiming that it would stimulate economic growth. Their idea is supported by the Property Research Group who say that stamp duty hinders people’ aspirations, discouraging thousands from buying homes. Stamp duty had always been considered one of the most unpopular taxes in the UK.
All of this has put immense pressure on Chancellor Rishi Sunak to extend Stamp Duty holiday beyond March 31st.
Despite pressure to extend holiday, Rishi Sunak is determined to stick to his previous decision. He has ruled out extending the holiday beyond March.
Here are three reasons why Sunak may be resisting all efforts to extend the holiday:
- Although the housing market has experienced a boom in sales, stamp duty holiday has actually costed £3.3 billion of taxpayer’s money.
- The government has to clear huge bills incurred due to COVID-19, which is estimated to be a staggering £300 billion. Stamp duty tax will certainly be of help in clearing those bills.
- Another thing to be considered is this: What’s the point of having a time-limited tax exemption scheme if it is going to be extended anyways? If tax holiday is extended this time, wouldn’t people have the same expectation about time-limited schemes that may be introduced in the future?
The Chancellor’s final decision about stamp duty holiday will come out on the 3rd of March 2021 when the Budget is presented.
If you need any further information or guidance with your property purchase, please do not hesitate to contact Aristone Solicitors.
Disclaimer: This blog post does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of Aristone Solicitors. Specialist legal advice should always be sought in any particular case.