Ahead of the announcement of the Budget plans set for next week, there has been much speculation in the press about an extension to the current Stamp Duty holiday period. Indeed, the latest headlines suggest that an extension until June could be on the cards. Yet according to some industry experts, the Chancellor of the Exchequer should be looking at abolishing Stamp Duty altogether.
The Holiday Worked
Chancellor Rishi Sunak introduced a Stamp Duty holiday in June last year in response to a dwindling housing market. The effects of the Covid pandemic were extending to house sales, and the holiday was intended to encourage buyers. For those in England and Northern Ireland, this meant that the threshold for paying the tax was increased from properties costing more than £125,000 to £500,000, whilst buyers in Wales and Scotland saw the threshold raised to £250,000.
The strategy worked. Raising the Stamp Duty threshold saw house sales rocket to levels last seen prior to the financial crisis of 2007. Houses were selling faster, too, with the average number of days to sale falling from 67 to 49. Furthermore, work on new-builds increased by a staggering 134%, greatly boosting the construction industry.
These impressive results have lead to calls for the Stamp Duty holiday to be made permanent. Doing so is predicted to encourage the building of new properties, helping to solve the current housing crisis. The change would cost the Treasury around £500 million, which could be easily recouped through the influx of new homes as well as taxes paid in other stages of the moving process such as conveyancing costs. Learn more about these costs at sites such as https://www.samconveyancing.co.uk/news/conveyancing/conveyancing-costs-explained-3366.
Indeed, looking at the Stamp Duty holiday period, Stamp Duty revenues actually increased from £1.1 billion to £1.35 billion thanks to the stimulation to the overall market. With people able to move up the ladder without the burden of Stamp Duty, the entire housing market bloomed, with sales up by 130% in the last quarter.
Some experts have put it in stronger terms, with analyst Jethro Elsden of the Centre for Policy Studies branding the existing Stamp Duty “the worst tax on the UK’s statute books”. The Centre’s report claims that Stamp Duty creates a great distortion of the housing market, puts buyers at a disadvantage and does nothing to solve the housing crisis. Instead, the holiday has proved that eliminating Stamp Duty can solve all of these issues. You can learn more about the report here: https://www.cps.org.uk/media/press-releases/q/date/2021/02/20/stamp-duty-holiday-boosts-sales/
It seems clear that making the Stamp Duty holiday permanent could prove transformative for the UK’s economy, with the benefits to the construction industry and the Treasury already evident. For those looking to buy and sell, removing the burden of Stamp Duty would undoubtedly be welcomed. Ultimately, the decision is in the Chancellor’s hands, leaving us to hope that the Budget announcement next week makes Stamp Duty a thing of the past.