Rishi Sunak’s announcement that stamp duty land tax (SDLT) would be paused on properties up to £500k between July 8th 2020 and March 31st 2021 caused an unseemly rush to buy.

In normal times, SDLT is added to the bill when you are buying property in England and Northern Ireland. The Chancellor’s property tax cut meant a saving to buyers of up to £15,000.

Now the end of this ‘holiday’ is in sight we can have a look at its effects on the UK’s all-important housing market, and advise those who are yet to complete their purchase.

SDLT holiday – the effects in 2020

House sales that were already underway – such as Mike and Sally Stuart’s purchase reported by the BBC – came with an unexpected windfall, whereas those who had recently completed – like James Davies in the same article – felt cheated as they had missed out.

There was no warning of the tax break, and no tapered entry to the scheme. There is (at the time of writing) no gradual end either – SDLT on homes costing under £500,000 is due to reappear on the 1st of April 2021, and it’s not an April Fool’s prank.

Why was the SDLT holiday introduced?

Extreme situations like the onset of the pandemic in 2020 require extreme measures; the shutdown of the UK housing market at its most active time of year dealt a blow to many in associated industries, detailed in our piece here.

The essential point of the SDLT holiday was to force the property market into action – and it seems to have done its job.

What were the effects of the SDLT holiday?

House prices have risen since the pandemic, with RightMove predicting a 2020 average house price rise of 3.3%. This is because instead of staying at home and waiting for an end to the disease restrictions, the SDLT holiday tempted buyers out to view houses and make a tax saving.

However, the effect of the housing market restarting in May 2020 was not just an increase in house prices. Those who rely on the housing market to earn a living (and pay tax!) have been busy.

This includes estate agents, property solicitors, moving firms, builders, and any number of related tradespeople.

UK housing market statistics 2020/21

Traditionally, property purchases throughout the year are fairly even, with fewer completions around January / February, rising to a peak in May and June.

2020 was a very different story.

April 2020 saw the lowest monthly sales completions since 2005 at 32,410 (less than half the previous year’s 73,790). This meant that something dramatic had to happen for the year’s number to get anywhere close to previous annual totals of around 1 million.

Cutting SDLT was the way to do it – but at year-end, the 2020 completion totals were still down at 890,000.

Has the SDLT holiday been worthwhile for the UK exchequer?

As the 2020 property completion numbers are now close to the numbers from 2019, Sunak is extremely unlikely to make any changes to the April 1st end date – though we hope there may be a potential easing for those who have exchanged.

The Chancellor will be desperate to start collecting money instead of haemorrhaging it, and SDLT typically tends to bring in a useful £11bn in tax revenue.

The income tax collected from those associated with the housing market, as well as the saving in potential furlough payments, has gone some way to easing the pain, but it’s unlikely to have raised anything like the missing £11bn in stamp duty.

The danger of rushing to hit the deadline

If you are buying property at the moment, it is likely you will be anxious to complete in time to make your tax saving.

However, the Law Society has expressed misgivings about the rush to complete. There are a number of things to do before a purchase is complete, and with pressure bearing down on all parties, there are going to be disappointments.

It only takes one delay for the whole chain to collapse, as we pointed out in our piece on delayed completion.

To complete your purchase you need to co-ordinate a number of professionals, including estate agents, conveyancing solicitors, moving companies, surveyors, and local authorities to run your property searches.

And if you are buying a leasehold property with a complicated mortgage, the process is further slowed down.

The stakes have obviously risen since we last wrote about the potential expense of delayed completion, so unless you’re already well on the road to exchange you might miss the deadline.

Conveyancers and estate agents are currently hard at work, potentially looking forward to April 1st as a welcome break.

Points to bear in mind

If you are still determined to complete in time, please bear in mind:

  • every professional you need to help you move in time will be extremely busy;
  • you are unlikely to get a ‘deal’ as everyone is rushing to complete;
  • the more complex your transaction, the more likely it is that you’ll miss the deadline, and
  • when the ‘holiday’ is over, many commentators predict house prices will fall.

We hope that wherever you are in your housing journey, it all goes well, and that you enjoy a successful 2021.

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