Stamp duty holiday extended: do I buy a home now?

If you’re in the process of buying a home, then chances are you’ll have been nervously waiting on Chancellor Rishi Sunak’s every word last Wednesday to find out if the stamp duty holiday was being extended.

In the end the Chancellor extended the stamp duty holiday by three months. This matters because more than 300,000 people were said to be stuck waiting for their home purchases to go through before the end of March. If the extension hadn’t happened, then they could have been out of pocket.

In fact, the stamp duty holiday was extended to the end of June, with further reduced discounts available to the end of September for people living in England and Northern Ireland. 

So is this a good time to buy a property?

House prices are unpredictable at best – and for every optimist there’s a pessimist with a different view. Here’s an overview so if you’re thinking about making a move, you have all the options.

Bear in mind there are different rules and taxes depending on where in the UK you live, including the Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales.

The plans for Scotland are currently unconfirmed, but it seems likely the stamp duty holiday will be extended too, though the threshold for paying is different at present. Wales has the three month extension – but not the discounted rates afterwards.

What is stamp duty?

Stamp duty is basically a tax you pay when you buy a house. Back in the old days, documents would need to be physically ‘stamped’ to make them legal, hence the name.

The tax you pay depends on what your property is worth. In July 2020 the Government reduced the threshold for paying, which meant if your property was valued at less that £500,000 in England and Northern Ireland you wouldn’t pay the tax. The threshold was £250,000 in Scotland and Wales. So buying a property now will save many people a chunk of cash.

With the Chancellor’s announcement, we now have a range of scheme extensions and discounts depending on the country you live in. MoneySavingExpert has updated its stamp duty calculator if you want to get a feel for what you’d be paying.

Buying a house: what next?

This sounds pretty good on paper, but the boom in the market has pushed lots of house prices up. So if prices drop later in the year you could lose out.

It’s really hard to know what house prices are going to do. But some pessimistic experts are saying that they could drop 4-5%. So you could save cash in the stamp duty holiday – but lose much more if the value of your new home decreases. Take a look at property price websites and see how much properties were going for in previous years and where your property fits in now. 

Property is a long-term investment so you need to consider the future market as well as the current one and the question still remains as to what will happen when the holiday does end. But realistically, we need to stop thinking about property as an investment and more about where we’ll be happy living – and what we’re willing to pay for that.