Chancellor Rishi Sunak’s stamp duty holiday was initially set to last for just eight months. This deadline was then extended twice due to the unprecedented extent of the pandemic. In total, over 500,000 homes were purchased between July 8th 2020 and September 30th 2021, at a significantly reduced level of stamp duty or ultimately paying none at all.
The stamp duty holiday was set up to try and support the housing market, which inevitably would suffer just as it has in times gone by with difficult recessions. However, the Government didn’t predict a 70% rise in purchase numbers. The holiday was expected to encourage buyers and sellers, but it also created a sense of urgency that had unprecedented results creating a mini housing boom.
Over the stamp duty holiday the total SDLT (stamp duty land tax) receipts from residential homes was over £9.62 billion, which is just £1.05 billion shy of the past two years during in the same period. Savills Research estimates during the period:
“the receipts from properties worth over £1 million increased by 48 per cent (some £1.62 billion)”...
... to only 2.7% of purchases, they would have created more than 50% of the residential receipts for SDLT. The stamp duty holiday helped the property market and seemingly without a painful cost to the Treasury.
Property investors look set to do well but how about homeowners? Homeowners have benefitted immensely, saving a massive £6.4 billion during this period. This saving is nearly balanced equally by those who purchased homes over and those who purchased below £500k. The Treasury, although happy with the success of the stamp duty holiday and the strength of the UK property market, may look back with some raised eyebrows at the generous sum they gave away. It would be fair to estimate that a similar scheme may not be implemented on this scale again until the market at that time can be gauged in more detail.
The Treasury will have also noted the increase in activity across the whole market nationally, from the very top, to the bottom, as well as the 3% additional home surcharge. Undoubtedly this increase in nationwide purchases has stemmed from the public’s reaction to multiple lockdowns (working from home) and a desire for more space and cleaner lifestyles. Typically London has seen a mass exodus in the last 18 months.
There have been some who have called for stamp duty to be removed at the top end of the market. However, based on the reasoning behind purchases being more for change of commute and healthier lifestyle choices, it indicates the rise in receipts over £1 million has been in regardless of, and not because of the stamp duty holiday.
Reviewing the SDLT holiday, it shows little support for why there would be a permanent cut in headline rates of duty. If there were, it looks as though it would be more likely at the entry-level of the housing market rather than at the top end of the market. Those hoping the surcharge may be in general reduced will be disappointed though, as the Government has been instead looking to increase the 3% additional home surcharge to 4% before the November budget.
The stamp duty holiday has finished, and those looking to invest by buying into the property market can expect some harder times when it comes to the tax implications. Investors have to find new ways to take advantage of new key areas to live in the UK, rising house prices and the property shortage. For more information about HJ Collection’s key areas, the fundamentals behind the property decision-making, and how it can benefit you as an investor, please get in touch with our team.
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