The tax on property purchase has been suspended on the first £500,000 of all sales in England and Northern Ireland since last July.
The stamp duty holiday was introduced to help buyers financially due to the adverse consequences of Covid-19 and thereby boosting a property market hit by lockdown.
Rishi Sunak has announced that Homebuyers are set to benefit from the stamp duty holiday until June 30. The Chancellor has said this is to ease pressure in transactions that has built up with property buyers trying to complete their purchase to meet the previous 31st March deadline.
Sunak has stated the stamp duty holiday he announced last summer has “helped hundreds of thousands of people buy a home and supported the economy at a critical time” but many purchases would be unable to complete before the original deadline.
After that, the threshold for paying the tax will be moved down to £250,000 until the end of September.
What is stamp duty and how has it impacted the housing market?
Stamp Duty Land Tax is paid on the purchase of property in England and Northern Ireland charged as a percentage of the purchase price. It was introduced to encourage buying and selling of properties after the first COVID-19 lockdown last year.
The duty holiday means anyone completing a purchase on a main residence costing up to £500,000 would save up to £15,000 with the previous threshold at £125,000. Higher value properties would only be taxed on their value above that amount.
First-time buyers are currently exempt from paying stamp duty on the portion of a property price below £300,000. This exemption will end on June 30.
There is no denying that the tax break introduced in July last year has brought a flurry of activity to the property market, resulting in greater demand and subsequently helped drive higher house prices.
Estate agents have seen a surge in sales due to the holiday and professionals throughout the industry have had pressure to complete purchases before the March deadline.
The extension will benefit those purchasers stuck in backlogs for mortgages, legal reports and surveys targeting the original March deadline but also attract property searchers to swiftly find properties to benefit from the tax savings. Meeting the new deadline will be difficult for new buyers but nevertheless will help sustain the demand surge in the upcoming months.
After July, property purchasers will still be able to benefit from a tax-free threshold of £250,000 until October when the pre-covid level of £125,000 is expected to return. This cooling down period after July will encourage searchers of lower value properties to ensure momentum in the property market.