The UK’s surging housing market could go into sharp reverse next year if the stamp duty holiday is not extended, risking a damaging slump, the government has been told. The £3.8bn stamp duty giveaway unveiled in July has been credited with fuelling a mini-boom in the property market, but it is due to finish on 31 March 2021 – the same date that the furlough programme and several financial support schemes are also scheduled to end. Experts believe ministers may be forced to extend the holiday to avoid a damaging downturn. Some believe that the end of the holiday in March will insert a cliff-edge in demand at the exact moment we expect employment and incomes to be suffering most. If it is not extended, the argument goes, there is the risk that the surge in transactions and prices this year will be reversed in 2021. The stamp duty holiday means buyers of homes up to a value of £500,000 in England and Northern Ireland pay no stamp duty, with a reduced rate for homes above that. For someone buying a £500,000 property, the saving is worth £15,000. Previously the “nil rate band” for residential property purchases was £125,000. The warning coincided with government property market data that showed the number of stamp duty transactions in the third quarter was 68% higher than in the previous three months, and the amount of money raised from the tax was 27% higher. HM Revenue & Customs said this reflected the easing of the lockdown measures earlier this year and the introduction of the duty holiday. There have already been a number of warnings about what may happen when the stamp duty holiday ends, plus calls from various quarters for an extension. Some commentators have predicted that when the cut expires, transactions will fall almost as low as at the height of the first Covid-19 lockdown. Furthermore, the slump in demand is likely to coincide with a rise in forced sales as the ending of the furlough scheme brings a sharp rise in unemployment

“Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of December 2020 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.”