The stamp duty holiday deadline is fast approaching (due to end 31st March 2021), with no official government confirmation yet as to whether it will be extended, but what does that mean for home movers?
The chancellor's suspending of stamp duty (in July) on the first £500,000 (raised from £125,000) of all property sales in England and Northern Ireland has helped boost prices and activity in the housing market. The move was aimed at helping buyers, sellers and the property market in general following the financial impact of the coronavirus crisis, which, according to Halifax, saw house prices fall for four months in a row as a result of the lockdown.
According to Nationwide, in part due to the stamp duty holiday, August saw the highest monthly price rise in more than 16 years, describing the housing market recovery as "unexpectedly rapid".
It means that nearly nine out of 10 transactions are no longer subject to stamp duty, with the average bill falling by £4,500.
But the stamp duty holiday is (currently) set to run until 31 March 2021, so buyers have just a few more months to take advantage of the break. Although the benefits of the holiday for buyers are widely highlighted, sellers also considerably gain, as not only will they benefit from the stamp duty saving on any onward purchase, it means that with the increased desire and demand of many buyers, (provided valued and marketed at the right price) agreeing a sale has become easier and often at a higher price than perhaps anticipated. The ripple effect also has a positive impact on many other industries such as estate agents, solicitors, removal companies, tradesmen, retail outlets and so on, due to the increase in the property market activity and the likelihood of buyers to spend the money saved on stamp duty on other things such as home improvements.
What is stamp duty?
Stamp duty is a tax paid by people buying properties, it varies across the UK.
In England and Northern Ireland, buyers pay Stamp Duty Land Tax, in Scotland it is Land and Buildings Transaction Tax, while in Wales, buyers pay Land Transaction Tax.
The amount handed to the government depends on where you are in the UK, your buying position and the price of the property.
The changes to stamp duty only apply to buyers in England and Northern Ireland, although cuts have been introduced to the other areas.
What has changed?
The government has temporarily increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, until 31 March 2021.
Anyone completing on a main residence costing up to £500,000 before then will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount.
This will save buyers as much as £15,000, if they are buying a property of £500,000 or more.
The average stamp duty bill will drop by £4,500, Mr Sunak has suggested, with nearly nine out of 10 people buying a main home this year paying no stamp duty at all.
However, critics worry it could encourage people who were planning to buy next year to accelerate their plans to take advantage of the tax break, leading to a slump in demand when the tax break ends.
How much stamp duty will I pay now?
If the property purchased is your main home, you won't pay any stamp duty on it at all if it costs £500,000 or less.
The next portion of the property's price (£500,001 to £925,000) will be taxed at 5%, and the £575,000 after that (£925,001 to £1.5m) at 10%.
The remaining amount (over £1.5 million) will be taxed at 12%.
You can calculate how much you are liable to pay here.
Before the announcement, stamp duty in England and Northern Ireland was paid on land or property sold for £125,000 or more, while first-time buyers did not pay any stamp duty up to £300,000. But this stamp duty holiday replaces the first-time buyer discount.
Landlords and second home buyers are also eligible for the tax cut but will still have to pay the extra 3% ‘additional’ stamp duty they were charged under the previous rules.
Do I still have time to beat the stamp duty holiday deadline?
According to Zoopla around 140,000 property sales are currently in the pipeline – double the number usually seen at this time of year.
The property portal says 92% of sales agreed in November and 81% of sales agreed in December are completed before the end of the following March in a normal year – but this year is anything but normal.
So those waiting until after Christmas to make an offer/agree a purchase may face disappointment, with only half of sales agreed in January normally getting over the line before the end of March.
With the considerable increase in the number of ‘sales agreed/in the pipeline’ and the current adapting to the ‘new normal’ working conditions, estate agents, lenders, surveyors and conveyancers are all facing huge pressure on resources, resulting in everything from mortgage valuations to legal formalities taking longer than before. As such, it is widely accepted that the time it is taking for a sale to go from ‘agreed’ to completion is considerably longer in the vast majority of occasions.
So, based on the holiday not being extended beyond the 31st March 2021, in order to give yourself the best chance of beating the stamp duty holiday, we strongly advise to get your property journey started (buying or selling) as soon as possible.
Holiday extension to avoid the ‘slump’?
Earlier this month, a group of property professionals united to write to the Chancellor to request that the stamp duty deadline be extended.
The joint letter is signed by 14 trade bodies, including estate agency, surveying, conveyancing and removals associations.
The group is requesting that the government extends the stamp duty holiday by at least six months and has asked for an announcement to be made before Christmas.
Mark Hayward of the estate agency group NAEA Propertymark says: ‘The stamp duty cliff edge on 31 March could cause thousands of sales to fall at the final hurdle and have a drastic effect on the housing market. We are calling for a rethink of these timings, so pressure on the system can be released to allow transactions to complete and avoid a disorderly and distressing period for movers and businesses.’
So far, the government has maintained that the 31 March deadline won’t be extended.
In response to a question in the House of Commons, housing minister Christopher Pincher told MPs: ‘The government does not plan to extend stamp duty relief, and will continue to monitor the property market.’ It remains to be seen whether the pleas from the industry will prompt the government into a rethink.
Only time will tell! But we believe that the government will not only want to keep the property market momentum going, as well as the positive ripple effects, but also avoid the devastating impact of the market grinding to a halt and property values falling if early 2021 leads to buyers putting buying (and sellers selling) plans on hold as they resign themselves to not being able to beat the holiday deadline. Worse still, if it means buyers and sellers pull out of agreed deals at the last minute as a result of missing the savings.
The view may also be taken that 2020 has been a turbulent year for many, and as such many buyers and sellers may have been unaware of the stamp duty holiday and associated savings (with other priorities on their mind), an extension will likely increase the awareness of many who weren’t already aware.
What can you do to speed up your move?
Last month, the Home Buying and Selling Group, which is made up of professionals from across the property industry, published a pledge to help moves progress more quickly.
It also provided advice for buyers and sellers on some simple steps they can take to speed up their transactions.
For buyers, it recommends appointing your conveyancer and getting a mortgage agreement in principle before making an offer, and arranging a house survey soon after the offer has been accepted.
For sellers, it advises instructing conveyancers at the same time as putting the property on the market (rather than after an offer is accepted), and completing the property information form ahead of time so any issues can be raised at the earliest opportunity.
Our top tip is to ensure you instruct a competent and proactive solicitor and you keep in regular communication with them (at least weekly) so to ensure nothing is ever ‘on the bottom of the pile!’.
If you would like to find out more or take advantage of the stamp duty holiday, get in touch with us for a free no obligation chat on 0207 231 0002 or email welcome@living-london.net
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*note, the above information is based on a number of sources as well as our own experience. There are many other factors which play and have played a role in the property market, the stamp duty holiday is only part of this. The above is based on a more general national point of view, and whilst it does run in line with what we are experiencing, the property prices and savings are different in the area we cover (SE16, London) in comparison to the national average. The above is accurate to our knowledge at the time of writing, but there are likely to be changes and more accurate information as 2020 ends and we go into 2021.
Sources;
BBC, Gov.co.uk, Which, Zoopla
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