An estimated three quarters of a million home buyers are set to benefit from the Government's stamp duty holiday, saving themselves nearly £5billion i
An estimated three quarters of a million home buyers are set to benefit from the Government’s stamp duty holiday, saving themselves nearly £5billion in tax.
Around 740,000 people who agreed sales between May and December 2020 have either already taken advantage of the saving, or will do before the deadline, according to property portal Zoopla.
Of these, 600,000 buyers bought homes worth less than £500,000 and will not pay any stamp duty, saving an average of £4,660 per sale or a collective £2.8billion – assuming that they complete by 31 March.
Doing their duty: 740,000 home buyers are set to take advantage of the stamp duty holiday
A further 140,500 sales have been agreed with a value of more than £500,000. These buyers will save £15,000 each or a collective £2.1billion.
They will still be liable for £2.9billion in stamp duty for the portion of their homes over £500,000, however.
This is before the 3 per cent additional rate for second homes is factored in.
Had the Government received this money, it would have pushed the total stamp duty intake for 2020, including the period before July when the holiday was introduced, to £9.6billion – 52 per cent higher than in 2019, and a record high according to Zoopla.
The pandemic and first lockdown led to a boom in housing sales in 2020, with 11 per cent more homes selling than in 2019, Zoopla said.
The value of homes sold that were eligible to pay some stamp duty was 26 per cent higher on average, and up to 40 per cent higher across southern England as older, wealthier home owners pushed the market ahead.
Zoopla also estimated that 70,000 sales agreed in 2020 were now at risk of not making the 31 March deadline.
There have been calls for it to be extended, but the Government has so far remained quiet on the issue.
Richard Donnell, research director at Zoopla said: ‘A surge in sales at higher house prices in 2020 would have created a major tax liability for UK home buyers, but the stamp duty holiday looks set to deliver £5billion in full or partial savings for 740,000 buyers spread over 2020 and the first quarter of 2021.
‘Many will have already completed their sale or will be completing shortly, but for some the risk of missing the deadline remains.’
Donnell also said there was ‘little evidence’ that new buyers were being put off by the end of the stamp duty holiday.
Chancellor Rishi Sunak introduced the stamp duty holiday back in July 2020
‘The pandemic and lockdowns continue to stimulate households to move home and this will help soften the short term impact when the stamp duty holiday finally ends,’ he said.
The stamp holiday was introduced on 8 July 2020 and changed the threshold at which buyers started to pay the levy from £125,000 to £500,000.
Chancellor Rishi Sunak’s intention was to boost the market following the first national lockdown and to stimulate other related areas of the economy.
Anecdotal evidence suggests industries such as surveying, removals and interiors have benefited significantly.
More landlords need mortgages to meet rising prices
Another impact of the stamp duty holiday has been that fewer landlords have been buying homes in cash, according to separate research.
This has been driven by the increase in house prices, good mortgage availability and an influx of first-time landlords spurred on by the tax holiday, estate agent Hamptons International said.
It claimed the proportion of landlords purchasing in cash fell to 52 per cent in 2020 – the lowest figure on record.
Cash landlords spent £11.7billion on new buy-to-let purchases, £1.5billion less than in 2019 and down from a peak of £19.8billion in 2015.
Graph showing the proportion of buy-to-let landlords buying properties with cash
The share of buy-to-lets bought with cash peaked at 62 per cent in 2017, but the proportion has fallen in each subsequent year since then.
Aneisha Beveridge, head of research at Hamptons, said: ‘While investor purchases remain low compared with pre-2016 levels, the stamp duty holiday has tempted more small and first-time landlords back into buy-to-let, reversing a shift towards portfolio investors.
‘Most of these new entrants are relying on a mortgage to fund their purchase, despite the changes to mortgage interest tax relief eating into the profitability of the sector for some.’