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Stamp Duty Holiday - What is the motive and will it work?

Rishi Sunak (Chancellor of the Exchequer) has today (8th July 2020) announced an increase in the threshold of properties which incur Stamp Duty Land Tax (SDLT) from £125,000 to £500,000, in an attempt to generate demand in the housing market, which will be here to stay until at least 31 March 2021.


What this means - Prior to this announcement SDLT was not charged on the first £125,000 of a properties selling price, with a two per cent rate up to £250,000 and five per cent on the next £675,000. 


To put in to perspective, a property with a sale price of £500,000 would have incurred an SDLT charge of £15,000.00.

Following the changes announced today, no properties up to a purchase price of £500,000 will incur any SDLT charges.


The purpose of bringing in the cuts to SDLT is to generate more home buyers and kick start the economy. However, there are a number of points to note here;

  1. How will this kick start the economy

  2. Will it work?

The purpose of the cuts is to generate and keep momentum going in the property market, however they will not necessarily create more demand for property, as you wouldn't necessarily decide to move house just because you could save a few £££'s on SDLT.

You are more likely to move house because you have seen somewhere you like, or there has been a change in your circumstance i.e. children, pay increase etc...


The average house price for 2019 according to GOV.UK was £232,710, which would have seen a SDLT charge of £2,154, so this cut to SDLT is not going to have a great impact on the average Joe who lives in your average house. Nor will saving a couple of grand convince you to move home.


Where this will work, is if you were already considering moving, you may decide to move sooner rather than later as you will now have, potentially, a few more thousand pounds to put towards a property (or keep in your pocket) if you can move before the 31st March cut off point next year.


So the proposal is not necessarily going to spark demand in properties, but more speed buyers up who are already considering moving. Would it therefore be better for the Government to wait and see where this could be best applied, to the sectors which need it most? As initial figures show that the market has bounced back just as strong as the day it left off, before lock down.


Another option would have been to entirely hold back and see how the market reacts, as if it continues to succeed on its own, the SDLT generated could be put towards paying the massive Covid-19 bill incurred over the last few months.


The proposal is not however a new concept, as prior to becoming PM, Boris Johnson proposed a plan of scrapping SDLT for homes costing less than £500,000 to be put in place, if he were elected as PM. Included in these plans was the reduction of stamp duty from 12% to 7% on properties worth over £1.5m.


So is it just a coincidence that this "SDLT holiday" includes homes up to £500,000 as previously promised?

Is this a way for the government to act on the promise but not long term?

Or will there be a planned review of the market in early 2021, stating positive effects of the "holiday" blaming Brexit and the current Covid-19 situation as an excuse to reduce SDLT long term through the back door?


One thing is for certain, whatever the motive, this is a good piece of marketing from the current government.




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