Deadline looms for homebuyers as stamp duty holiday to be phased out

Credit: PA

The clock is ticking for people rushing to buy homes before the phased end of the stamp duty holiday, potentially saving them thousands of pounds if they meet the deadline.

Stamp duty is the tax you pay when you buy a property.

The break is one of the many tax relaxations the government introduced at the start of the Covid-19 pandemic in a bid to keep the economy going.

From Thursday, July 1, the "nil rate" stamp duty threshold in England and Northern Ireland, which has been temporarily set at £500,000 since July last year, will be halved.

In a phased move, the threshold will revert back to its pre-pandemic level of £125,000 from October 1.

For buyers - particularly those in more expensive areas - that will mean the end of a tax saving of up to £15,000.

The stamp duty holiday was extended after originally being due to end in March.

Credit: PA

The Law Society has stressed that solicitors have been working late into the night ahead of the deadline in order to meet their clients' needs.

Removals firm AnyVan reported a 200% increase in demand for removals vans in June, compared with June 2020.

While many areas of the economy were shut down during the height of coronavirus, the housing market saw a rise in the number of people buying homes.

Residential research analyst at estate agents Savilles, Lawrence Bowles, said: “Activity in the prime markets remains strong, with the number of sales agreed above £1 million running at 50% above the June 2017-19 average."

Credit: PA

He continued: “At these higher price points, the stamp holiday saving is a much lower proportion of the purchase price.

"We’d therefore expect that strong level of activity to continue over the next few months as we work through substantial pent-up demand.

“Our recent buyer survey suggests that 85% intend to continue with their purchases even if they miss the June 30 deadline, while 10% say they might try to renegotiate on price.

"Just 5% say they will consider withdrawing.”

Analysts are also waiting to see the impact that Wednesday’s deadline has on the overall housing market, which has been repeatedly described as being fuelled by the tax break.

The housing website Rightmove has found that £16,000 has been added to the price tag on a home across Britain since the stamp duty holiday was announced in July 2020.

This is more than the potential stamp duty saving of up to £15,000 that a home buyer could make if completing a property purchase before Thursday.

It's also feared that people may miss out on the stamp duty holiday completely by dropping out of their purchase and starting again. Sales are currently taking around four months to complete, according to Rightmove.

Listen to our latest episode of Coronavirus: What you need to know

Due to the rise in people working from home, many are also looking to make lifestyle changes and no longer need to live as close to their workplace.

On average, people are moving 50 miles, with a growing proportion of moves being from cities to rural areas, AnyVan said.

Grainne Gilmore, head of research at Zoopla, said: “The busy market is being driven by a once-in-a-generation re-assessment of home as a result of the pandemic.

“This has led hundreds of thousands of households to reflect on how and where they want to live – and they are making a move as a result, with family houses most in demand.

“This trend has been certainly boosted by the stamp duty savings on offer due to the stamp duty holiday, but levels of sales activity in recent months have remained high, with many of these buyers now only expecting the lower, tapered, stamp duty exemption.”

Credit: PA

Some experts say it will leave “healthy” levels of housing market activity remaining once the phasing out of the stamp duty holiday begins.

Tom Bill, head of UK residential research at Knight Frank, said: ““There will be a financial hit from ending the holiday but the wider point is that it signals a return to normality.

“Indeed, the second half of this year should see healthy levels of activity in the UK housing market.

"There is frustrated demand in the system, new supply is starting to pick up and the labour market is stronger than most economists predicted six months ago.”