Yahoo Finance Revealed: The plan to extend and stagger stamp duty holiday by three months
The Government is expected to announce an extension to the stamp duty holiday as the industry rallies behind a staggered three-month drop-off.
The Times newspaper said it has been told that Chancellor Rishi Sunak will use his Budget next week to move the deadline to the end of June.
A spokesman for The Treasury said they could not speculate on tax ahead of fiscal events.
Rightmove, the property website, estimated if the stamp duty holiday was extended until the end of June, an additional 300,000 sales in England could benefit. This would mean that buyers could save £1.75bn in tax, with 80pc of these sales paying no stamp duty at all.
If the holiday is not extended, 100,000 buyers who agreed a purchase last year will lose out on the tax savings, according to Rightmove.
Tom Bill, of estate agency Knight Frank, said: “An extension is inherently fair because it addresses the fact parts of the conveyancing system have become overwhelmed, which has jeopardised completion dates."
Analysis firm Capital Economics said the move would prevent sales tumbling in the months after April, and stop prices falling due to fall-throughs and renegotiations.
However, it suggested that the extension would not incentivise much new activity as conveyancing delays, which have created a four-month gap between an offer being accepted and exchange, would not allow transactions to take place in time.
Treasury under pressure
It comes after the Treasury faced pressure for an extension to the holiday. Trade bodies the Building Societies Association and UK Finance have proposed a tapered end to the holiday, which would see any house purchase where a mortgage has been approved at a certain date granted an additional three months to complete while benefiting from the rate reduction.
The BSA's Paul Broadhead said: "The unprecedented increase in property transactions have resulted in unexpected delays in completing house purchases. Those already in the house buying process should not be penalised. It would be unfortunate if the positive effects of the stamp duty holiday unravelled for the sake of a short extension."
It was understood ministers had settled on a plan to extend the stamp duty holiday by six weeks for those already in the process of buying. However, mortgage lenders said this would not be enough to stop sales falling through.
Mark Hayward of Propertymark, a trade body, said: "Extending the holiday until June will create another cliff edge.
"We know from our own research that the majority of estate agents expect to see an increase in the number of failed sales if the stamp duty holiday ends at a cliff edge, so we need Government to consider a tapered end to the holiday so that buyers aren’t forced to pull out at the last minute and the property market can continue to thrive.”
Impact of the tax cut
The temporary stamp duty holiday was introduced last July and meant residential buyers paid no tax on the first £500,000 of a property purchase. After March 31, the nil-band rate could reduce to £125,000 and a 3pc levy on anything above.
The holiday has boosted confidence in the market following its shutdown in March last year. However, the spike in demand combined with successive lockdowns have led to increased delays in the home buying process. It now takes an average of 22 weeks between agreeing an offer to completion versus 12 weeks prior to the pandemic.
Buyers are struggling to complete within the current deadline. One in five sales agreed in July 2020 will miss the March 31 cut off, according to Rightmove.
A Treasury spokesman said: “The temporary stamp duty cut is helping to protect hundreds of thousands of jobs which rely on the property market by stimulating economic activity.
“Its time limited nature is what has encouraged people to take advantage of the scheme.”
