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  • Writer's pictureInvestment Synergy Team

Stamp duty holiday comes as relief for current homebuyers....

The stamp duty holiday, raising the threshold at which current home buyers pay the tax from £125,000 to £500,000, has been extended to June 30. Then it will move back to normal, via an interim threshold of £250,000, by the end of September.

The chancellor’s decision will come as a relief to about 600,000 home buyers that are stuck in backlogs as conveyancers, lenders and search departments struggle to cope with increased demand while working from home during a succession of lockdowns.

It had been estimated that as many as 374,200 buyers — who had agreed a purchase by February 17 — were likely to miss the March 31 deadline, with one in five at risk of dropping out of sales. The extension to June 30 will allow an additional 193,198 buyers, as well as their estate agents and solicitors, to benefit, according to calculations by TwentyCi.

There will be pressure on buyers and sellers to complete by June 30, despite the introduction of an interim £250,000 threshold from June 30 until September 30 as the maximum tax saving drops steeply from £15,000 to £2,500.

After June 30 the first-time buyers’ stamp duty exemption on the first £300,000 of properties worth up to £500,000 is expected to resume; for more expensive properties, first-time buyers will pay the same tax as other buyers.

The extension will benefit home movers in England and Northern Ireland. There has been no announcement yet on whether the first ministers of Scotland and Wales intend to extend their own country’s transaction tax holidays, which are still due to end on March 31

The chancellor’s move will not help the property industry alone, but should boost the wider economy, with each home move estimated to add £37,750 to GDP, according to TwentyCi. This includes £4,018 per move in extra spending on the high street on items such as new furniture, kitchens, bathrooms and decorating.

By timing the end of the stamp duty holiday with an expected recovery in the economy, the chancellor will be hoping to cushion the property market from any sudden price crashes.

The Office for Budget Responsibility now forecasts that property prices will be 5.1 per cent higher in 2021 than in 2020, but will fall by 1.7 per cent in 2022.

Many have argued that the stamp duty cut has led to a surge in property prices that far outweighs possible tax savings. Property prices have increased by £16,675 since the holiday was introduced, while the average saving has been a very modest £2,500, according to Anthony Codling, of Twindig, a property platform.

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