Rishi Sunak will extend the stamp duty holiday until the end of June to boost the housing market, it was reported last night.
Last July the Chancellor exempted most buyers from the levy if they completed their transactions before March 31, 2021 – saving people up to £15,000 – and leaving would-be homeowners racing to meet the deadline.
But sources have told The Times he is now preparing to use his Budget next week to extend the holiday by another three months.
The policy covers the sale of property worth up to £500,000, and would cost around £1billion to implement.
It comes amid concerns that not extending the holiday would create a cliff edge, jeorpardising hundreds of thousands of sales.
Rishi Sunak is considering extending the stamp duty holiday until the end of June to boost the housing market, it was reported last night
Recent analysis by the Centre for Policy Studies (CPS) think tank said the tax break had propelled house sales to their highest level since before the 2007 financial crisis
Recent analysis by the Centre for Policy Studies (CPS) think tank said the tax break had propelled house sales to their highest level since before the 2007 financial crisis.
After an initial slump in sales between April and June 2020, the number of transactions increased from 132,090 in the second quarter to 225,870 in the third quarter and 316,300 by the end of quarter four – the highest level since 2007.
The think tank’s research shows that stamp duty revenues actually rose by 27 per cent in Q3 compared to Q2, from £1.1billion to £1.35billion, and suggests they will rise again in Q4 given the continued increase in transactions.
The CPS is calling on ministers to either permanently increase the threshold on primary residences to £500,000 – at a cost of £3billion – or abolish it altogether.
Jethro Elsden, CPS data analyst and the report’s author, said scrapping the holiday would be a ‘sledgehammer blow to the housing market’
The Chancellor is also set to extend the furlough scheme until the end of June, costing £4billion a month.
The business rates holiday for the retail, hospitality and leisure sectors will also be expanded at a cost of £1billion a month, the Times said.
And the VAT cut for hospitality and tourism would also last until the end of June, costing £200million a month.
Mr Sunak is also said to be considering putting up corporation tax to as much as 25 per cent over the course of the Parliament.
Setting out his roadmap to lift all lockdown by June 21, Boris Johnson (pictured with the Chancellor) assured that some financial support would continue. He said: ‘We will not pull the rug out’
The Chancellor, who recently marked one year in the job, will next Wednesday unveil the Government’s spending plans for the year.
Government borrowing this financial year has hit £270.6billion – a reflection of the unprecedented peacetime spending to mitigate the economic harm of lockdown.
Setting out his roadmap to lift all lockdown by June 21, Boris Johnson assured that some financial support would continue. He said: ‘We will not pull the rug out.’
But pre-Budget speculation has centred on possible tax rises to get the finances on a more even keel.
The Conservative 2019 election manifesto pledged no rises in the Treasury’s three biggest revenue raisers: income tax, VAT and national insurance.
If he sticks to this commitment, Mr Sunak will have to raise other taxes, with Capital Gains tax mooted for a hike.
Yet the CPS has warned that raising taxes could suffocate businesses and hinder growth.
It instead advises the Chancellor to cut taxes to stimulate business innovation, drawing on the lessons of post-war booms.
A spokesman for The Treasury said they can not speculate on tax ahead of fiscal events.
Rishi Sunak could boost economic growth by cutting taxes in his upcoming Budget, new study claims
By Jason Groves, political editor, for the Daily Mail
Rishi Sunak should slash taxes in next week’s Budget to boost growth, a study says today.
The Centre for Policy Studies urges the Chancellor to learn the lesson of history and avoid tax increases in the wake of a major economic disaster.
Mr Sunak is said to be preparing to unveil plans for a rise in corporation tax in the Budget next Wednesday to reassure financial markets that he is committed to restoring order to the UK’s battered public finances.
Chancellor Rishi Sunak, pictured, is preparing his budget next week which will outline the government’s intentions to return the economy to normality after Covid-19
Part of the government’s plan for recovery is believed to involve massive spending on infrastructure projects
He has also hinted that an increase in fuel duty may be needed after a year in which tax revenues have plunged and spending has soared.
But the report from the Centre for Policy Studies warns that the lessons of major crises, such as world wars, is that countries should slash taxes to encourage business investment.
The centre-Right think-tank said the US had enjoyed ‘near miraculous’ growth after the Second World War at the same time as slashing public spending by two-thirds. By contrast, the UK suffered years of austerity by maintaining high spending and trying to protect domestic industries from competition, it said.
Report author Jethro Elsden said: ‘A key lesson from post-war recovery is that interventionist, high-spending policies lead to lower and slower economic growth.
‘Rather than maintaining big government after the pandemic, what we need is a smaller state which intervenes less – and to give the private sector the resources, support and certainty it needs to power the country back to growth.’
Whitehall sources yesterday indicated that the Chancellor will extend the £50billion furlough scheme and other Covid support until at least the end of June in line with the Government’s ‘roadmap’ for unlocking the economy.
Commons leader Jacob Rees-Mogg also suggested that public spending was likely to remain high in the short term, with the Chancellor expected to unveil new investment in infrastructure alongside record spending on Covid next week.