Stamp duty holiday to be extended – but will it create another cliff edge?
Rishi Sunak is said to be preparing to introduce a three-month extension to the stamp duty holiday to allow more time for existing property deals to be completed.
The chancellor is planning to announce a limited extension through to the end of June to help prevent thousands of property sales from falling through, the Times has reported.
Sunak has been under growing pressure to extend the deadline amid concerns it will create a cliff-edge and risk thousands of buyers pulling out of transactions if they miss the deadline for the tax break.
A petition demanding a stamp duty holiday extension, which has proved popular with buyers and sellers, as well as agents, conveyancing solicitors, mortgage lenders and surveyors, has now attracted more than 150,000 signatures.
The Times has been told that the chancellor will use his Budget next week to move the stamp duty holiday deadline to the end of June, bringing it into line with the easing of lockdown. The extension to the policy could cost the Treasury around £1bn.
Dominic Agace, chief executive of leading estate agents Winkworth, like many agents, has welcomed the news for the many thousands of buyers facing a cliff edge deadline.
He said: “This is great news, as it helps all those who, through no fault of their own, were set to face unexpected costs arising from a deadline set two lockdowns ago. This will ensure the property market maintains its positive influence in the economy in the tricky next few months as we start a sustained covid recovery.
“I do hope that longer term stamp duty reform isn’t forgotten. Ultimately, the property market needs longer term reform as well, to ensure it is a healthy functioning market, allowing people to achieve their aspirations and supporting the economy in the long term.”
But David Westgate, group chief executive, Andrews Property Group, believes that extending the stamp duty holiday by three months is simply kicking the can down the road.
He commented: “We will have the same cliff edge scenario in three months with buyers desperately rushing to complete sales, but facing delays due to conveyancing issues.
“Conveyancers are already struggling to work their way through the growing pile of cases accumulating on their desks.
“Extending the deadline to the end of June will simply add a whole lot more cases to the bottom of the pile, and clog up the system.
“Also, bear in mind that with lockdown restrictions due to be lifted, this will fuel the property market as we come into the traditionally busy Spring period.
“Transactions could go through the roof causing more bottlenecks in the conveyancing process.
“A much better solution would be a tapered end to the stamp duty holiday to allow conveyancers the time to work their way through cases.”
According to The Times, the chancellor is also expected to extend the furlough scheme, which is due to conclude at the end of April 30, over the same period before it tapers off as people return to work.
The business rates holiday for retail, hospitality and leisure sector will also reportedly be extended, along with the VAT cut for hospitality and tourism.
However, the article makes no reference to capital gains tax.
There is mounting speculation that the chancellor Rishi Sunak will increase capital gains tax rates in the Budget next week, as he looks to find the money required to cover the government’s unprecedented spending and borrowing during the pandemic.
CGT is generally currently charged at 10% for basic taxpayers, but there are growing calls that it should be increased across the board or possibly aligned to income tax rates – at up to 45% for higher rate taxpayers.
As far as residential property is concerned, CGT is currently charged at 18% on for basic rate taxpayers and 28% on any amount above the basic rate. Higher or additional rate taxpayers pay 28% on any gains from residential property, along with trustees or personal representatives of someone who has died.
Paul Joyce, head of mergers and acquisitions at Mazars in London, said: “We may well see an increase in CGT rates with immediate effect, potentially to align them with income tax rates.”
The government’s tax adviser recently recommended that CGT be overhauled with proposals that could see the number of people hit by the duty increase sharply.
Sunak, who commissioned the review, is considering proposals by the Office of Tax Simplification (OTS), a Treasury-based body, to reform capital gains tax in the light of the economic and fiscal impact of the Covid-19 crisis.
The move has the potential to bring in an extra £14bn by reducing exemptions and doubling rates, according to the review.