The stamp duty holiday has ended after 14 months in England and Northern Ireland, with potentially big consequences for the UK housing market.

From 1 October, homebuyers (with the exception of first time buyers) will pay stamp duty on property purchases over £125,000, down from £250,000 during the final stage of the tax holiday from July to September. Similar tax breaks in Scotland and Wales ended earlier this year. 

The stamp duty holiday, which began in July 2020, was intended to boost the housing market during the COVID-19 pandemic. Demand surged, with a spike in mortgage lending during late 2020 and early 2021. Property portal Rightmove estimates that around 1 million households saved on stamp duty during this period, to the tune of about £6.1 billion. 

However, that money may simply have gone to sellers instead: Nationwide estimates that the average house price rose by £22,000 between July 2020 and July 2021, wiping out even the biggest possible stamp duty saving of £15,000.

The tax savings also do not seem to have tempted new buy-to-let investors into the market. Stats from estate agency Hamptons show that landlords made 12% of all residential property purchases during the stamp duty holiday, barely above the 11% recorded in the 12 months before the pandemic. More than 80% of their buys were under £250,000, meaning that their tax savings were fairly small – especially as the 3% surcharge for second homes remained in place.

It’s unclear how much of the surge in demand was down to the tax break. Market experts also point to increased savings during the pandemic, new demand for outdoor space and home offices, low interest rates and the ongoing housing shortage.

The final proof of the effects of the stamp duty holiday may only come now that it is over – but the market doesn’t seem to have slowed down much. House prices dipped during the summer when the stamp duty threshold fell from £500,000 to £250,000, but are now rising strongly again.

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