Stamp duty holiday extension: An expert explains what it could mean for you

24 February 2021, 14:42 | Updated: 24 February 2021, 14:55

An industry expert looks at why the government may look to extend the current stamp duty holiday, and what this may mean for you.

Greg Cunnington, Director of Lender Relationships and New Homes at mortgage intermediary Alexander Hall, told LBC:

The property market has been buoyant since it re opened in May last year, with a combination of pent up demand from the initial lockdown period and the stamp duty holiday seeing record numbers of property sales agreed. It is fairly widely agreed that the stamp duty holiday has been one of the policy successes of the pandemic. It has meant that basic stamp duty has not been payable up to £500,000 until 31 March of this year, which is a saving of up to £15,000 of tax. As such, many buyers have looked to take advantage of this incentive.

READ MORE: Stamp duty holiday 'to be extended to end of June', report suggests

Is there going to be an extension to the stamp duty holiday deadline?

It has been widely reported that Rishi Sunak is preparing to extend the stamp duty holiday by three months until the end of June, with an announcement set to come as part of the budget on March 3. This has not been formally confirmed by the government, so you should not make any plans yet on this basis that involve any financial commitment, but it appears very likely this will be confirmed shortly.

Why would the government want to extend this?

An extension of the stamp duty holiday would be a boost to keep the property market buoyant as we emerge from lockdown.

Website RightMove estimates an additional 300,000 property transactions in England could benefit from the tax saving if the stamp duty holiday is extended. That is a lot of buyers the government can help.

Although of course this would mean lower tax receipts from the stamp duty, home moving feeds into various other parts of the economy. It leads to buyers purchasing homeware items, the need for removal firms, building and gardening work are instructed – it is a huge part of keeping the economy going.

How can I benefit?

It is not clear yet if this will be a tapered extension to help buyers with purchases already agreed, or an extension for all buyers.

There has been real concern from many buyers, estate agents and solicitors that if the government stuck to the 31 March deadline that many buyers would miss this deadline, which would cause chains to collapse and people would miss out on their purchases altogether. There have been service issues from mortgage lenders, solicitors have been struggling under the volumes of work and there have been reported delays in local authority searches being returned, which combined meant there were real concerns for buyers over completing by the 31 March deadline. As such, for buyers with purchases agreed this extension will mean real peace of mind.

If this is an extension for all buyers, then there will be a short window of opportunity for new buyers to now take advantage of the stamp duty holiday. We have found buying activity has remained high this year despite the impending deadline, so an extension could find a lot of applicants currently viewing wanting to move fast!

Any buyer wanting to take advantage of this extension will need to be able to progress fairly quickly, so should ensure they have their mortgage agreed in principle by speaking to an intermediary such as ourselves with their documentation prepared, and set up with a solicitor who has confirmed they have a manageable work load, to have the best chance of success to meet any new deadline.

Some buyers will still miss this new deadline, if confirmed, so our advice would be to set yourself up to move as quickly as possible.

Interestingly, the conversation around buyers’ purchasing power has focused primarily on the stamp duty holiday deadline in recent months. Buyers also need to factor in that mortgage product availability has improved significantly, meaning there are now more options to pick from to suit their circumstances.

This is great news for buyers with small deposits or those who need to maximise their incomes. In fact, there has been a 42% increase in the number of mortgage products available in the last 4 months. Speaking to an intermediary will help you to identify and navigate these options and most probably be pleasantly surprised at the outcome.