When Did the Stamp Duty Holiday End and Will the Scheme Ever Return?

Stamp duty is one of our oldest taxes, having been introduced in England in 1694. Since then, it’s been updated to reflect changing times. But in recent years, the levy was completely upended. The Government was forced to make drastic changes to its fiscal planning following the pandemic.

Various support packages were introduced to keep the economy afloat, including the furlough scheme and mortgage holidays. But for the property market, stamp duty holidays arguably had the biggest impact. Usually, stamp duty land tax (SDLT) is paid when a person buys a property in England or Northern Ireland. It’s levied where a property costs over £125,000, or £300,000 for first time buyers. Those who are upsizing or expanding a property portfolio are usually the ones primarily concerned with SDLT. And it’s paid on a tapered scale – from 2% to 12%.

However, in July 2020, a stamp duty holiday was introduced to support the market. The scheme was extended and tweaked a few times. But when did the stamp duty holiday end? Eventually, the rates reverted to normality from October 2021. The changes meant any buyers completing a purchase for less than £500,000 before 1 July 2021 didn’t have to pay any stamp duty at all.

Here, we’ll explore the details of how the stamp duty holiday worked, its affect on property prices, and if the scheme will be re-introduced.

Source: Martyn Gerrard

When is stamp duty usually paid?

Usually, SDLT is levied on the purchase of property or land over certain price thresholds. The tax is paid on the purchase of a freehold property, a new or existing leasehold, a property through a shared ownership scheme or on the transferring of land or property in exchange for payment.

There’s no SDLT to pay on the first £125,000 of a residential property. Two percent will be paid on the next £125,000 (values between £125,001 and £250,000). The next £675,000 will face a charge of 5%, rising to 10% on the next £575,000. Any remaining amount above £1.5 million will have 12% levied.

Source: Gov.uk, Land Registry

When was the stamp holiday introduced?

Between 8 July 2020 and 30 June 2021, no stamp duty was paid on any residential property valued up to £500,000. Between July 2020 and July 2021, average property prices across the UK ranged between £236,687 and £253,608. Many buyers during this period would have benefited from the changes.

While reduced rates were available, a 3% higher rate was applicable for additional dwellings. Property investors purchasing through limited companies were also able to benefit, with the price threshold raised before a 3% surcharge applied.

Stamp duty is payable upon completion of a property transaction. This is known as the “effective date of transaction”. Usually, the bill needs to be covered withing 14 days of completion. This would have been important to note for investors attempting to make some last-minute purchases.

If a completion date fell after the stamp duty holiday ended, they would not have benefited from the reduced rates. This pressure became especially prevalent as deadlines loomed Many solicitors were struggling to keep up with the last-minute rush.

Source: Sail Solutions

How did the stamp duty holiday impact the market?

Throughout the lifespan of the stamp duty holiday though, the market saw unprecedented levels of demand. With the ability to save thousands, buyers and investors rushed to take advantage. House sales rose 15.6% in August 2020, rising a further 21.3% in September.

A jump in property prices was also seen as the initial July 2021 deadline approached. As buyers asked themselves when would the stamp duty holiday end, they appeared jolted by the answer. In England, the average property price sat at £267,295 in May 2021. In June, this rose by almost £20,000 to £284,252. The stamp duty holiday helped boost the market as intended. But demand took a hit as Government support was withdrawn.

The number of residential properties sold in the UK fell by 55.1% in the year to June 2022. This was believed to be the result of the scheme ending. Also, as the scheme came to a complete end in 2021, Rightmove estimated English buyers saved £6.1 billion on their stamp duty bills.

Will the Government re-introduce the scheme?

Demand waned, and the savings potential dropped. Consequently, it begged the question of whether the scheme should be extended over the long-term. For current buyers, the question of when did the stamp duty holiday end, will not be as important as whether it will be re-introduced.

Indeed, an official petition was launched to extend the scheme, which ended up getting more than 150,000 signatures. The Government did end up extending the scheme somewhat after its official response. However, the state is resistant to implement any continuing reductions.

In December 2020, the Government said: “The SDLT holiday was designed to be a temporary relief to stimulate market activity and support jobs that rely on the property market. The Government does not plan to extend this temporary relief.” The treasury is especially unlikely to issue any more cuts given how much was missed out on the first time around.

In the final quarter of 2020, HMRC missed out on over £500 million in lost tax revenue because of the scheme. What’s more, the state collected £5.2 billion in stamp duty taxes between April and June 2022. This was a 27% rise on the same period a year earlier. Given the dire economic reality facing the Government – along with the plans it’s made to address the problem – it’s unlikely that it’ll want to give up one of its strongest cash cows.

Instead of asking when and why did the stamp duty holiday end, property investors should perhaps concern themselves with how else they can save on tax.

Source: Ellisons Solicitors, The Guardian, Compare the Market, Land Registry, This is Money, Property Industry Eye, Mortgage Strategy, City AM, petition.parliament.uk