Could you save on Stamp Duty?

Consider pros and cons of government incentive

The current Stamp Duty holiday isn’t a reason to overstretch yourself

Property prices move based on supply and demand, and the demand that drives up prices often comes from “cheap” mortgages and a booming economy. But while we may have low interest rates, we don’t have a stable economy, never mind a booming one.

That’s why Rishi Sunak introduced the Stamp Duty holiday on property up to £500,000 until March 2021.

He wants to encourage us to make our moves sooner rather than later and get the housing market and its associated services going.

So should you be taking advantage of it? If you were already planning – or had already agreed – your next move, then this scheme is literally giving you free money.

And I like people to own their homes, in part because it gives you the option to downsize and release tax-free capital when you retire.

You get to enjoy the property while raising your family, then benefit from some of its value when you retire which, for many, is a vital part of funding their future plans.

But before you rush in to moving, make sure you’re in the right position to do so. Consider the bigger picture carefully with your eyes wide open.

It’s only a good deal if you were planning to move house anyway

BUYER BEWARE?

While saving thousands on Stamp Duty is an attractive prospect, bringing a move forward could end up costing you much more.

Only do it when you’ve got at least three months of expenses behind you – preferably six – even if it means waiting and missing the Stamp Duty hol iday altogether. Unemployment will be rising for some time, with redundancy announcements arriving daily.

Job forecasts for the end of 2020 make for pretty grim reading and – between local lockdowns and Brexit – we’re going to be in a period of economic instability for a while.

With the furlough scheme winding down, that all adds up to less job security so you will need cash in reserve to carry you through a rough patch, just in case. At best, a missed payment or two will hit your credit rating. At worst, you could lose your home.

However attractive the Stamp Duty saving looks, I urge you not to max yourself out and leave nothing back – and don’t take on a mortgage that leaves you zero wiggle room with your monthly payments.

You just don’t know when you might need some spare cash.

As they say in the investment world, “Don’t let the tax tail wag the dog”.

Don’t move just because the Government has offered you an incentive. It’s only a good deal if you planned to move anyway.