On 8 July 2020, as the country slowly started to reopen following the first major lockdown, Rishi Sunak announced a time-limited stamp duty holiday across England and Northern Ireland to support the housing market. The devolved governments of Scotland and Wales soon followed with their own slightly different versions.

At the time, there were already some early signs that the housing market was going to behave very differently than it had in previous recessions. But few could have predicted the mini housing boom that followed.

There is little doubt that the stamp duty holiday added a sense of urgency to the market and distorted the normal pattern of transactions, resulting in three spikes in transactions in 2021:

• in March, when it was originally expected to end;
• in June, when it was curtailed; 
• and most recently, in September, when it was finally brought to a close.

Our research shows that over half a million home purchases that would otherwise have paid stamp duty escaped the charge over this period.

However, given the 70 per cent surge in transactions that was seen in the market over £500,000, receipts continued to roll in to the Treasury. Indeed, over the period from the end of June 2020 to the end of September 2021, total stamp duty land tax (SDLT) receipts from residential property were over £9.62 billion, only £1.05 billion less than in the same period of 2018 and 2019. 

And by our estimates, the receipts from properties worth over £1 million increased by 48 per cent (some £1.62 billion). That means that such sales, while accounting for just 2.7 per cent of transactions during the period of the stamp duty holiday, have generated over 50 per cent of residential SDLT receipts.

On the face of it then, the cost to the Treasury was limited for a measure that undoubtedly helped restart the market. By contrast, our analysis shows the savings enjoyed by home buyers in this period were far more substantial – some £6.4 billion in total; a saving split roughly evenly between those who bought below and above the £500,000 mark.

What, if anything, does this mean for the future of stamp duty? 

The Treasury will certainly be relieved that receipts were as high as they were, though it may well look back on this as a pretty generous giveaway given the unexpected strength of the market. In the event of any future disruption, I’d expect it would be a little slower in rolling out such a measure until they see exactly which way the market reacts.

Also, the extent to which both activity at the top end of the market and the 3 per cent additional homes surcharge preserved receipts will not have gone unnoticed.  

There have been many calls for stamp duty to be cut at the top end of the market. However, the uncomfortable truth is that the surge in activity appears to have been primarily driven by changed lifestyle priorities and the so-called race for space. That suggests the increase in receipts over £1 million has been despite, not because of, the stamp duty holiday.

Accordingly, the experience of the holiday provides little meaningful support for a permanent cut in headline rates of duty, unless to support the housing market entry level.

And any hope that surcharges might in fact be reduced will have been dashed by the news that the Government actively looked at increasing the 3 per cent additional homes surcharge to 4 per cent prior to the November budget.

Further information

Contact Lucian Cook

Contact Savills Research