Will the government stamp out the Stamp Duty Land Tax Holiday?

According to the Halifax, the cost of the typical UK home has risen to more than £250,000 for the first time and house prices in October 2020 were 7.5% higher than a year ago.  Also, house prices have increased by 5.3% over the past 4 months.  The SDLT holiday is working.

However, the increase in property transactions (and the tougher underwriting of loans and pandemic measures) has caused the conveyancing process to slow considerably and large backlogs have developed.  So much so, that it is possible that new transactions will not be in position to exchange contracts before the SDLT holiday withdrawal deadline. 

There are grave predictions that when the SDLT holiday is withdrawn, the property market will “fall off a cliff-edge” as buyers withdraw when it becomes apparent that they will miss the deadline, leaving them liable to pay SDLT at the pre-holiday rates.  To put this into perspective, it is estimated that between 200,000 and 325,000 homebuyers are expected to miss out on the SDLT holiday which could cost the economy millions (if not billions) in much needed revenue.  Some keen (or desperate) sellers might accept a reduced price in order to make the sale, which will in itself cause a reduction in house prices.    

To combat this, the government has been asked to extend the SDLT holiday by 6 months.  It remains to be seen whether they will oblige.  What is obvious though is that something needs to be done to slow the predicted downturn.  So, what will or can the government do to “break the fall”?  

1. The first and most obvious option is to extend the SDLT holiday.  The difficulty is that there will always be a downturn of sorts when the holiday is withdrawn.  Should we just pull the plaster off now and be done with it?!
2. Another option is to keep this new SDLT regime, rather than it being a holiday.  However, the Treasury is in need of all the revenue it can get and so this is unlikely to happen.
3. They could decide that any property transactions where a sale price is agreed before 31 March 2021 would still qualify for the SDLT holiday even if contracts are not exchanged by that date.  This should reduce pressure on the conveyancing process but, I suppose, could easily be “fiddled” by less honest individuals!
4. Introduce a phased return to the previous SDLT regime over a number of months (or years) which should go some way to alleviate concerns of a sudden nosedive in property transactions.

Industry bodies have asked Rishi Sunak for a decision before Christmas on whether the SDLT holiday will be extended.  Let’s hope, for the good of the property market, that much like Santa and his reindeers, the Chancellor delivers some good news…