Will the stamp duty holiday be extended? Here's everything we know

Will the stamp duty holiday be extended beyond the 31 March? Property experts explain.

Millennials struggling to get out of rental trap and buy their own homes
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The pressure is mounting on the government to extend the stamp duty holiday that has buoyed up the UK property market amidst the coronavirus pandemic. The tax break is due to end on 31 March this year. But will the stamp duty holiday be extended? Here is everything we know about it.

The demand for housing surged in the second half of 2020, at least in part due to the temporary abolition of stamp duty tax on properties under £500,000, a measure that will come to an end in March. While the Government doesn't have any current plans to extend the tax break, property experts and estate agents are calling for an extension to support the housing market.

For many homeowners looking to move since the Covid-19 outbreak, the stamp duty holiday has represented a chance to mitigate the rising house prices that, alongside the increased deposit amounts required by lenders, have made buying a property significantly more expensive. 

But this desire to seize the opportunity to save has put enormous pressure on all the stages of the house sale process – conveyancing, surveying, mortgage and search services all are struggling to clear a backlog of inquiries. Data from Rightmove shows a backlog of 650,000 properties changing hands, many of which will not complete before the end of the stamp duty holiday.

David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses why the government needs to review the upcoming stamp duty holiday deadline, to prevent the cliff-edge of those who believe they will benefit from missing out, and to soften the drop in demand:

'It is critical that the government reviews this stamp duty holiday, and either announces an extension or amends the tax payment date so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March next year. The most preferable option would be a phasing out of the holiday, to avoid those who are currently in the process of purchasing their properties, essentially being thrown off a cliff-edge.

'The government also needs to do more to help get people on the property ladder - government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.'

It may well be that all that's really needed is a slight tweak of the rules so that the 31 March deadline refers to, for instance, a sale agreed rather than the full completion of the purchase. As it currently stands, the deadline may have a detrimental effect on the housing market and the wider economy, according to property experts and estate agents. David Alexander, the joint chief executive officer of apropos by DJ Alexander, believes that the market will hit 'a brick wall at the end of March' if the stamp duty holiday isn't gently phased out rather than just stopped:

'The most sensible and balanced approach would be to continue the threshold extension and phase it out over six months to a year to ensure there is no sudden collapse in the spring. In this way, we could ensure some continuity and stability in the property market at a time when many may feel that there is very little certainty in employment, finances, or the wider economy.'

'There is much to be optimistic about in the coming year but there is also a balancing act to be struck by the government to ensure that the gains the property market has made in recent months are not simply dissipated in a loss of momentum in the market and unfair and unprecedented property tax hikes in the Budget.'

Alexander is referring to the widely rumoured tax increases to be announced in the March 2021 Budget – although, at this point, it is far from clear which areas of taxation the government will pursue in order to make up for the hugely expensive coronavirus support measures such as the furlough scheme. In fact, property tax has not figured in the Chancellor's discussions of the Budget so far, with rises to Capital Gains tax rates looking more likely.   

House buyers should also consider the possibility that house prices will begin coming down at some point in 2021, which would mean that losing out on the stamp duty saving wouldn't be quite so significant as it was for those buying in 2020. 

Anna is a professional writer with many years of experience. She has a passion for contemporary home decor and gardening. She covers a range of topics, from practical advice to interior and garden design.