For more than a year, home buyers in England and Northern Ireland have benefitted from paying little or no stamp duty land tax when completing the purchase of residential properties that are their main residence.

The stamp duty holiday was introduced on 8 July 2020 to try and stimulate the housing market which had ground to a halt during the first national COVID-19 lockdown last spring.

That served to send the market into a frenzy as sales and house prices both soared to record highs around the UK, despite subsequent restrictions being place for the 12 months that followed.

Between July 2020 and June 2021, no stamp duty land tax was paid on the first £500,000 of property purchases completed in England and Northern Ireland.

Figures from the Office for National Statistics (ONS) showed that in the year to July 2021, the average residential property price increased by 8%, while some areas saw prices spike by more than 20%.

Stamp duty land tax rates in England and Northern Ireland returned to their pre-pandemic levels on 1 October 2021. Similar tax breaks in Scotland and Wales reverted back to normal from 1 April and 1 July 2021, respectively.

‘Stamp duty should be abolished'

Further data from the ONS showed HMRC collected £5.7 billion in stamp duty land tax receipts in the first four months of 2020/21, with receipts for July 2021 hitting their highest on record.

That suggests the stamp duty holiday had worked, with the number of homes changing hands rising to new highs, reflected in the Treasury netting record tax receipts.

The UK's leading think-tank, the Institute for Fiscal Studies (IFS), believes stamp duty land tax in England and Northern Ireland should be scrapped to stimulate economic growth.

Paul Johnson, director at the IFS, said:

"Stamp duty land tax is a particularly damaging tax.

"Its abolition would stimulate the economy and could be introduced alongside a commitment to replace the forgone revenues with a reformed and revalued - and therefore fairer - and increased council tax."

‘Big questions over value for money'

Krishan Shah, researcher at the Resolution Foundation, however, claimed the stamp duty holiday wasn't solely responsible for rising house prices. Instead, he argued that other factors were at play.

Shah said:

"UK house prices have boomed over the past year and many have pointed the finger at the stamp duty holiday as the main cause, but the evidence doesn't support this popular claim.

"It now seems that other factors, such as higher savings, changing housing preferences and falls in mortgage rates, may have been more or equally important."

The Foundation also suggested the housing boom experienced over the last year would've happened anyway, as more people sought larger homes away from city centres.

"The problem with the stamp duty holiday isn't that it caused a house price rise, but that a boom in transactions and prices would almost certainly have taken place without it.

"That begs big questions about value for money, especially when we consider that the policy in England and Northern Ireland alone looks set to cost an estimated £4.7bn in forgone tax revenues."

Current stamp duty rates

Residential property transactions completed in England and Northern Ireland between 1 October 2021 and 31 March 2022 are subjected to the following rates:

• Up to £125,000 - 0%
• Over £125,000 to £250,000 - 2%
• Over £250,000 to £925,000 - 5%
• Over £925,000 to £1,500,000 - 10%
• Above £1.5m - 12%.

Buy-to-let landlords pay an extra 3% in stamp duty land tax on all of these rates, including the nil-rate band, while the first £300,000 is tax-free for first-time buyers.

Talk to us about property taxes.