Rishi Sunak 'will implement a stamp duty cut immediately' - Daily Mail

Rishi Sunak 'will implement a stamp duty cut immediately' after furious warnings that the housing market would grind to a halt if he delayed to the Autumn

• Rishi Sunak is considering a six-month stamp-duty 'holiday' on most homes 
• Economists warn delaying the change could put housing market in deep freeze
• Treasury sources made clear there will be no delay to any move on stamp duty
• Former chancellor Philip Hammond said move will shift demand, not increase it 

By James Tapsfield, Political Editor For Mailonline and Jack Maidment, Deputy Political Editor For Mailonline

Published: 08:19 BST, 7 July 2020 | Updated: 10:15 BST, 7 July 2020

Rishi Sunak will not delay a stamp duty cut slated for his mini-Budget tomorrow after warnings that the housing market would be wrecked for months.

The Chancellor's crucial coronavirus recovery package is expected to include a six-month 'holiday' from the charge on most homes to kick-start the market.

However, economists voiced alarm at the idea that the move could be announced to the Commons, but not implemented until the Autumn. 

Fears were raised that purchases would grind to a halt as people would simply wait in order save thousands of pounds. 

Sources told MailOnline that there would not be any delay in the implementation of a stamp duty cut. 

Rishi Sunak, pictured during a visit to Shakespeare's Globe theatre yesterday, is considering a six-month stamp-duty 'holiday' on most homes to kick start Britain's dormant market

Economists and property experts have warned that delaying stamp duty changes could put the housing market into the deep freeze (File photo)

What are the current rules on stamp duty?

Stamp duty must be paid when people buy residential property over a certain price. 

The current property value threshold at which stamp duty must start to be paid is £125,000. 

But there are different rules for first time buyers if the property is worth less than £500,000. 

The amount of stamp duty paid gradually increases based on the value of the property. 

So no stamp duty is owed on the first £125,000 of a property's value. 

Stamp duty worth two per cent is paid on the next £125,000, then five per cent is owed on the next £675,000. 

For more expensive properties, stamp duty at 10 per cent is charged on the following £575,000 and anything above a property value ceiling of £1.5 million is charged at 12 per cent. 

So if someone bought a house at a price of £275,000 they would pay zero per cent on the first £125,000, two per cent on the next £125,000 (worth £2,500) and five per cent on the final £25,000 (worth £1,250), giving a final stamp duty bill of £3,750. 

First time buyers can currently claim a discount so they do not have to pay any tax on property's worth up to £300,000 and five per cent on the portion from £300,001 to £500,000.

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Treasury officials have been looking at a temporary six-month increase in the stamp duty threshold from the current level of £125,000 to an amount between £300,000 and £500,000 to stimulate demand.

But economists and property experts warned that a delay until Autumn, as had originally been mooted, could put the housing market into the deep freeze.

Paul Johnson, of the Institute for Fiscal Studies, said any uncertainty about a potential change would distort the housing market by encouraging people to delay their decisions.

He said Mr Sunak must choose to either launch the duty holiday tomorrow - or decisively rule it out.

'To do otherwise could ruin the housing market for months to come,' said Mr Johnson. 

His comments were echoed by buying agent Henry Pryor, who said: 'Either announce that you are changing stamp duty or announce that you are not.'

Economist Julian Jessop urged the Treasury to 'stop flying kites' over potential cuts in both stamp duty and VAT.

He said: 'The announcement of a stamp duty holiday, but not until the autumn, could kill the housing market in the meantime. 

'There has been similar speculation of an across-the-board VAT cut, which could delay spending on other big ticket items too.'

Philip Hammond, the former Tory chancellor, said cutting stamp duty could help to bring forward demand for housing. 

But he said that 'history tells us' such a move would simply shift demand in the short term rather than actually increase it. 

He told BBC Radio 4's Today programme: 'Cutting stamp duty, reducing VAT in particular sectors, are certainly ways to bring forward or manage demand. 

'But I think the Treasury officials who will have been working up all sorts of proposals for him during the lockdown will be telling him that the history tells us that cutting VAT or cutting stamp duty can bring forward demand but it doesn't overall increase the level of demand, it simply shifts the pattern of it.' 

Mr Hammond said cutting stamp duty was undoubtedly 'one tool in his tool box' which Mr Sunak could choose to use tomorrow. 

He said: 'Clearly, if people are told that a stamp duty holiday is coming in the autumn people will not complete house purchases ahead of the autumn if they can possibly avoid it. 

'That doesn't mean to say that sales activity won't pick up but people will want to time their completions beyond an autumn budget if that is what the Chancellor is signalling. 

'It is one tool in his tool box. He has many tools available to him. If he is clear eyed about what he is doing he would be pulling forward and to some extent pushing back from now into the autumn and pulling forward from next spring demand that would otherwise would have happened then. 

'If that is what he wants to do then a temporary cut in stamp duty could be one of the tools that would help to do that.' 

Mr Hammond's comments came as an index showed house prices have been falling for four months in a row - the first time this has happened since 2010.

Halifax said that property values in June were 0.1 per cent lower than they were in May. 

The decline in June followed month-on-month price falls of 0.2 per cent in May, 0.6 per cent in April and 0.3 per cent in March.

However, despite four months of prices edging downwards, house prices were actually higher in June when compared with a year ago. 

Across the UK, property values in June were 2.5 per cent higher than in the same month a year earlier. The average house price in June was £237,616.

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2020-07-07 09:14:14Z
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