On 8th July 2020, the Chancellor of the Exchequer implemented a stamp duty holiday on all properties up to the value of £500,000 in response to the impact COVID 19 was having on the economy.
The stamp duty holiday cut the rate of stamp duty on properties below the value of £500,000, to zero percent, effectively saving home buyers up to £15,000 on their tax bill. However, this has led to a significant increase in activity in the property market, and now delays in completing are leaving thousands of home buyers facing an unexpected tax bill.
Rightmove have released its latest analysis showing that it is now taking 126 days from the acceptance of the offer, until completion. Rightmove have also estimated that around 613,000 property sales that were agreed in 2020, are now stuck in the backlog awaiting completion.
The good news for buyers stuck in this backlog, is that Rishi Sunak is currently considering an extension to the stamp duty holiday. Whilst it is possible that ending stamp duty could become a permanent fixture, it is widely believed that this may be replaced by a ‘proportional property tax, levied on the existing value of homes’. This is due to the fact that the current stamp duty initiative acts to hinder families looking to upgrade their homes and for elderly property owners who are looking to downsize.
However, the current situation suggests that an estimated 100,000 home buyers will miss out on the stamp duty holiday and be forced to pay a tax bill that they hadn’t factored into the price of their property. This could result in many buyers having to reduce their offer in order to factor in the cost of the stamp duty.
Despite all this, the current property market remains strong as people change their priorities and look for more space in their dwelling following lock down. Estate agents are reporting that home buyers are seeking more outside space and city dwellers are looking to move to the suburbs and countryside.
You might want to consider getting your finances in order and preparing for any unexpected tax bills like this in the future.