Stamp Duty Holiday

Posted on 7 July 2020

Due to the recent pandemic, there have been several calls for a stamp duty holiday to help revive the housing market as lockdown eases. The physical restrictions during lockdown had a big impact on the market, which Zoopla has examined.

The re-opening of estate agency branches from last week is a welcomed development, allowing activity to proceed, but it makes sense that any sort of a tax cut could further help boost activity in the market. The government will want to examine the fundamentals of any such proposals carefully.

Zoopla calculations in April showed that housing transactions could be down by at least 50% this year, which could mean halving stamp duty receipts to £4 billion – assuming house prices don’t change. The theory is that giving potential buyers an effective tax break (by cutting their stamp duty bill to zero), will encourage them to move home which will then lead to increased market activity.

There’s an argument that this only brings forward activity that would have happened anyway. But when trying to give the economy a boost, this seems acceptable. A stamp duty holiday is not only about helping people achieve their goals in terms of housing. It’s also about how important the housing market is to the economy as a whole.

The stamp duty holiday introduced during the recession in late 1991 to 1992 was at the time when the housing market slumped (amid very high interest rates).

The stamp duty rate at that time was just 1%. The threshold for paying stamp duty was temporarily raised from £30,000 to £250,000. The average price of a home was just over £50,000. Despite this intervention, housing transactions in 1992 were still lower than in 1991 and house prices still fell. But the likelihood is the figures would have looked far worse without a stamp duty holiday.

During the financial crisis in 2008 to 2009, another stamp duty holiday was introduced. This holiday raised the lowest threshold for paying the 1% rate of stamp duty from £125,000 to £175,000. The rates for more expensive properties were 3% and 4%.

The average price of a home at this point was just under £175,000!!

All of the above information is from Zoopla 

We are constantly researching into the property market to provide the best advice for our clients, you can contact us today on 01293 278312 if you need advise purchasing a property!


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