Will the reduction to stamp duty rates be extended?
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Introduction
On 8th July 2020, Rishi Sunak, the Exchequer’s Chancellor, came up with a temporary reduction of the stamp duty tax rates. Since the announcement, buyers have not been taxed for properties worth £500,000 and below. The stamp duty rates applied only to buyers acquiring properties worth over £500,000. The temporary reduction was to last until 31st March 2021.
A lot of buyers flocked the market since the announcement taking advantage of the reduced duty rates. The reduction of stamp duty rates may have been due to the COVID-19 pandemic and the lockdown that lead to property backlog. A lot of buyers were not able to proceed with the acquiring of property during the first lockdown. There are still buyers rushing to purchase properties before 31st March 2021.
The government is currently determined to oversee the deadline and has not offered any extensions despite the pressure to reduce from people who depend on the property market. Therefore the stamp duty rates are set to return on 1st April 2021. There will be a discount on the rates for the first time buyers, but other than that, the stamp duty will be back to normal.
There might be a reduction in house prices in 2021 due to the economic impact of the COVID-19 pandemic. This means that when the pandemic starts to subside, the property owners who are rushing to buy properties now before the stamp duty relief ends will be stuck with a property that will decrease in value throughout the year.
Real estate agents and all the people benefiting from the stamp duty holiday are asking the government to extend the tax relief for another six months. The reduction of stamp duty rates has helped the market that had gone dormant because of lockdown. But despite all the efforts, the government is firm on maintaining the 31st March deadline.
There is fear for what might happen should the stamp duty rates relief not be extended. The housing market is feared to go down drastically since people will still be recovering from the impact of the COVID-19 pandemic. So whether the government will consider an extension on the tax relief is still unclear. Some developers have decided to offer subsidised rates to encourage buyers. However, buyers shouldn’t acquire property solely because of the stamp duty tax relief.
Over 23,000 people signed a petition requesting an extension to reduce stamp duty for an extra six months. Since the signatures were over 10,000, the government was obligated to respond. A spokesperson from the Treasury said that the relief was meant to stimulate the housing market and jobs that depend on the property market. However, the government has no plans to extend relief.
Stamp duty land tax is a crucial revenue source for the government that funds many essential services. That could be the reason why the government is committed to the 31st March 2021 deadline. Because many people were buying properties before the March deadline, there have been a lot of delays, and it’s feared that some buyers will be left out. That is why an extension of the deadline by the government will be appreciated by many. An extension will allow all the on-going transactions to be completed and avoid confusion.
Conclusion
Despite all the efforts from real estate agents, surveyors and other people whose jobs rely on the housing market to make the government extend the relief on stamp duty, the government has remained unshaken. However, it might be too soon to say whether they might change their stand regarding the stamp duty rates relief. Should the government decide to extend the stamp duty holiday, it will help ease the pressure lenders are currently experiencing and keep real estate agents working.
An extension on the reduction of stamp duty rates can also help the low-income earners find favourable prices to afford and acquire properties. It can also be beneficial when people resume work after the coronavirus crisis and encourage investors. Because there are many fears regarding the end of stamp duty tax relief, many investors have shunned away from the housing market.