The stamp duty holiday introduced by the UK Government has helped to revive the housing market during the Covid-19 pandemic.
Property asking prices have dipped further in January as sellers seek to agree deals before the tax break comes to an end, according to Rightmove.
During the first lockdown in March 2020, transactions fell, but Chancellor Rishi Sunak’s introduction of a stamp duty holiday has helped to drive a boom in the property market.
So, what is the stamp duty holiday, when does it end - and could there be an extension?
Here’s everything you need to know.
What is stamp duty?
Stamp duty is a tax levied on the purchase of property or land bought in England and Northern Ireland.
It is also known as Stamp Duty Land Tax (SDLT).
The name stems from a tax charged on written legal documents, which historically required a physical stamp to be attached to the paper to show the duty had been paid.
The rate of stamp duty depends on where in the country you are purchasing a property, and what its price is.
The threshold is where stamp duty land tax starts to apply. So, if you buy a property for less than the threshold, there is no SDLT to pay.
While England and Northern Ireland have the same rates, Scotland has its own tax called the Land and Buildings Transaction Tax (LBTT). In Wales, it is the Land Transaction Tax (LTT).
You are able to check how much stamp duty you have to pay using the HM Revenue and Customs’ Stamp Duty Land Tax calculator.
What is the stamp duty holiday?
The stamp duty holiday was a scheme introduced by the chancellor back in July 2020.
It raised the minimum threshold from £125,000 to £500,000.
So, if you purchase a property and it completes before the stamp duty holiday ends, you only have to pay tax on the amount over £500,000.
The holiday meant anyone buying a home for the average English house price at the time of the announcement - which was £254,423 - would pay no stamp duty.
Before, for this price, they would have faced a bill of £2,721.
Why was the holiday introduced?
Rishi Sunak’s stamp duty holiday was a response to a drastic fall in house sales during the coronavirus crisis.
When he made the announcement, the latest published house sales data showed the volume of transactions across the UK had fallen by 65.9 per cent in the 12 months from April 2019 to April 2020.
It was hoped that the tax break would boost the property market and help homebuyers who were suffering financially following the first national lockdown.
Announcing the holiday, Mr Sunak said: "House prices have fallen for the first time in eight years and uncertainty abounds in the market, a market we need to be thriving.
"We need people to be feeling confident - confident to buy, sell, move and improve. That will drive growth, that will create jobs. So, to catalyse the housing market and boost confidence, I have decided today to cut stamp duty.”
Housing transactions boomed at the end of last year driven by buyers rushing to complete deals before the tax break deadline.
The stamp duty holiday also seems to have caused a decline in property prices, with Rightmove reporting that prices for flats and houses advertised between 6 December and 9 January were down 0.9 per cent on the previous month.
Rightmove has also said the housing market is still busy, with sales agreed in January increasing by 9 per cent on the same period last year.
When does the stamp duty holiday end?
The stamp duty holiday is supposed to end on 31 March 2021.
Those who exchange now and complete their purchase before that date won’t have to pay any stamp duty if the property costs under £500,000.
However, if you do not complete the purchase by that date you could be hit by the tax.
First-time buyers will still be eligible for a discount from April 1, with no stamp duty to pay on properties priced below £300,000.
Will the stamp duty holiday be extended?
The government has been urged to extend the stamp duty holiday to support the housing market through the rest of the pandemic.
Solicitors and mortgage advisors have said house purchases are taking much longer due to current lockdown restrictions, while homebuyers are also concerned that their property transactions could fall through if it ends on 31 March.
An online petition calling for the tax break to be extended by six months will be debated by the House of Commons after more than 110,000 people signed it.
Chancellor Rishi Sunak has not yet said whether the stamp duty holiday will be extended.
Helen Hutchison, residential property partner at law firm Irwin Mitchell, said: “At present, there’s been no word from the Chancellor as to an extension of the stamp duty deadline.
“An extension would no doubt be greatly received, not only by home buyers but also by conveyancers and others in the industry who are coming up against increased pressure to get deals over the line by the deadline.
“Many are also facing increased delays in the length of time transactions are taking - such delays are inevitable given the current lockdown, with searches, mortgage offers and information from other parties understandably taking longer due to the stay at home requirements and closure of schools.”
Pete Mugleston, from the onlinemortgageadvisor.co.uk, said: “Everyone also knows that far too many people will miss the deadline.
“And given the delays caused by the mad wave of volume, most of those agreeing a sale in the next few weeks have little chance in getting it through in time.
“Thousands of deals will collapse as those relying on the discount to make the deals work break the chain - the total cost to everyone involved could be huge, given what it costs to move.
“The government cannot deem the initiative a success if it lets down so many of the dormant buyers it aimed to inspire.”
In December the government issued a statement on the stamp duty holiday that 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.”