Missed the stamp duty holiday deadline? 5 options to help you with your property plans
The Stamp Duty Holiday introduced by the government over the pandemic period has made a substantial difference to the housing market. Since it was introduced in July 2020, house prices have soared to record levels, reflecting a massive demand.
However, this process is now coming to an end. Since the beginning of July, some Stamp Duty is being charged, with the timetable of restoring normal levels by the end of September. So, what does that mean if you are currently thinking of buying a home? Have you missed out on the Stamp Duty holiday?
What is Stamp Duty?
Stamp Duty is a tax collected by HMRC on house purchases, charged to the buyer. It typically raises about £12bn a year, constituting around 2% of the government’s total tax income.
Stamp Duty is calculated as a percentage of the sale price of the property, but different rates apply as the price goes up. The first £125,000 is zero-rated, with any amount between £125,000 and £250,000 charged at 2%. This gradually rises, until any part of the price over £1,500,000 is charged at 12%. Buy-to-let landlords and anyone buying a second home are also charged an extra 3%.
What is the Stamp Duty holiday?
In June 2020, the government suspended all Stamp Duty payments on purchases of any property for less than £500,000, with any sum over that liable for a charge. Buy-to-let landlords and second home buyers could also make use of the Stamp Duty holiday, but they have still been charged the extra 3%.
This measure was taken to reduce the financial problems much of the population was suffering, and protect the housing market from collapse due to people not being able to afford to buy homes. This seems to have worked, with government figures showing that residential property transactions in May 2021 were 123.4% higher than in May 2020. This demand has been reflected by a rise of 13.4% in house prices in the year to June 2021.
However, the Stamp Duty holiday has now started to wind down. Since 1st July 2021, the threshold for the zero rate has reduced to £250,000, and from 1st October 2021 the rates will revert to normal.
Can I Still Take Advantage of the Stamp Duty Holiday?
The window has not completely closed yet, but it depends on your circumstances and how far along you are in the process.
If you can complete before the end of September you will still only pay the reduced transitional amount, although only on the cheapest properties will you pay nothing, especially if you live in the south-east of England.
However, if you are still searching for a property to buy, it is highly unlikely that you will make this deadline. As we explained in a recent article, the time it takes to buy a home can vary considerably, depending on a range of different factors, but the conveyancing alone (i.e. the whole process between your offer being accepted and completion) is unlikely to take less than ten – twelve weeks, and at the moment probably much more. This means that, if you were to start the process at the beginning of August, it would take you to October — after full Stamp Duty has been restored.
This is not the end of the road, however – as there are still some great opportunities.
Here are five options to help you to buy or sell a home.
1. Arrangements for first-time buyers
Unless you are already well advanced in the conveyancing process, you will need to pay full Stamp Duty. However, there is one exception. Starting from July 2021 and continuing indefinitely, first-time buyers will not have to pay Stamp Duty on purchases up to £300,000.
Clearly, this is extremely useful, since few first-time purchases are likely to be above that price, meaning that effectively the Stamp Duty holiday will continue for first-time buyers.
2. Lower deposits on mortgages
The government has also introduced a guarantee scheme to encourage lenders to offer mortgages with a 5% deposit instead of the usual 10%. This applies to any residential property worth less than £600,000 that is not a second home or a buy-to-let.
This will, of course, make it easier for you to save up for a home. If you are buying a property for £200,000, for example, you will only need to find £10,000 for the deposit, where previously you would have needed £20,000.
Lenders are not obliged to offer these lower deposits. However, if you hunt around (or, better still, go through a mortgage broker, who will know the market) you should be able to find a 5% deposit mortgage
3. Arrange everything in good time
If you are buying, a good tip is to arrange everything as early as possible. This ranges from booking the removal firm to arranging for your utilities to be connected in the new property.
Clearly, none of this can be done before you have a date to move, but early booking, especially for removals, is likely to mean that you get lower prices. As far as utilities are concerned, the last thing you want is to find that your electricity, gas or WiFi cannot be connected until several days after you move in.
4. Make your home attractive to buyers
If you are selling a property, there are many things that you can do to improve your property and attract potential buyers. As we explained in a recent article, this could include decluttering the place and opening windows, curtains and blinds to let light and air in.
Two locations to pay special attention to are the kitchen and the garden. Make sure the kitchen is clean and presentable, even if this means buying new cupboard doors. At the same time, ensure the garden looks attractive, from weeding to jet-washing the patio, to giving fences and buildings a fresh lick of paint.
5. Hire an expert solicitor
Whether you are buying or selling, a crucial factor in the speed of completion is your choice of solicitor. Too many people fall into the trap of going with the cheapest solicitor.
While some delays will be out of the control of even the best solicitor, an expert Conveyancing Solicitor will be more likely to be able to solve issues, and quickly. This includes putting appropriate pressure on the other party’s solicitor if they are causing delays.
You should look for a firm of solicitors who have a dedicated Conveyancing Team that has a proven track record in expediting tricky property transactions quickly and efficiently.
At Osborne Morris & Morgan, our award-winning Conveyancing Team are experts in their field and hold long-standing relationships with clients. If you’re moving home, get in touch with us and we will be happy to give you a free quotation for Conveyancing services.