Thursday, May 13, 2021

Extension of stamp duty holiday ‘could help 300,000 sales’ | Stamp duty

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About 300,000 property purchases in England could benefit from a three-month extension in the stamp duty holiday, it has been estimated, as reports suggest the chancellor could be set to prolong the tax break in next week’s budget.

The tax saving on homes costing up to £500,000, which was announced last summer, is due to end on 31 March.

However, Rishi Sunak is understood to have decided to extend it for three months in line with other measures to support the economy.

It is not clear if the extension would apply to all purchases, or would be on a tapered basis and apply just to those agreed before an earlier day, as lobbied for by some in the mortgage industry.

The rush to take advantage of the break, which amounts to a tax saving of £500,000, combined with lockdown restrictions across the country has led to delays and backlogs in the homebuying process, and calls for the deadline to be moved.

The property listing website Rightmove has estimated that if it is not changed, about 100,000 buyers who agreed a purchase in 2020 will have to pay the tax, which will add up to £15,000 to their costs.

It said that figure combined with sales that could be completed before a June deadline, could mean an additional 300,000 transactions escaped the tax, at a cost of £1.75bn to the Treasury.

In recent months the tax break seems to have led to a boom in transactions and prices, with official figures showing prices climbed by 8.5% in 2020.

The credit referencing agency Experian said there were 12% more applications in February than in the same period last year, even though the chance of completing before the March deadline is low.

Lisa Fretwell, Experian’s managing director of data services, said: “Extending the deadline will help ensure these people get their deals over the line and provide a welcome boost for the mortgage market.”

However some in the industry have said that the chancellor will just delay the inevitable “cliff edge” if he simply extends the holiday, and that a new hard deadline would mean buyers continuing to attempt to complete ate all costs.

Hedley Adcock, a director of property law firm Adcocks Solicitors, said buyers were “taking high-risk strategies to speed up the process”, such as skipping property searches and valuations.

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“If an extension is announced next week, it is essential that a tapering-off period is also granted, such as a paperwork deadline,” he said.

“In other words, buyers who have either exchanged contracts but not completed, or those who can demonstrate they have started a transaction before the deadline and have incurred solicitor costs, for example.”

He added: “Our worry is that if the deadline is simply extended, we can expect to see buyers continue to take unnecessary risks to aid the moving process in a few months’ time.”

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