Stamp Duty Deadline

Stamp Duty Deadline (June 2021)

Craig discusses the June Stamp Duty Deadline and what it means for people buying a home.

As the stamp duty extension finishes tomorrow it’s good timing to explore this in this week’s podcast. If you’ve not completed by 30 June, what does that mean for you now?

How has the stamp duty holiday affected the market?

The housing market’s been very busy since the first lockdown last year. Sales are up and the average house price is up – now at over £250,000 pounds in the UK.

There’s been a knock-on-effect to the whole home buying process. Timescales from ‘sale agreed’ to completion, which are normally 10 to 12 weeks, are now taking on average 5-6 months.

There are around 700,000 house sales that have not yet exchanged contracts or completed. And if you’re one of those 700,000, from 1 July are now liable to pay stamp duty on your new home, depending on the purchase price. Zoopla estimates that around 50,000 house buyers could miss out on the tax break due to delays in the system.

What exactly is ‘Completion’?

Completion is the final stage in the process of buying a new home. It means everything has gone through, contracts are signed and you now have the keys to your own home – it’s legally yours. It’s not to be confused with exchanging contracts, which is the step before completion: when you have signed and exchanged contracts for your new home but the legal work is not yet fully completed.

If you’re buying with a mortgage – which 80% of people in the UK do – at the point of exchanging contracts the funds have not yet been requested from the lender. Essentially, if you haven’t paid yet, it’s not legally yours. So if you haven’t completed, you now need to budget for the new Stamp Duty too.

What’s the impact if I haven’t completed?

The good news is that there is still some benefit if you complete before 30 September – there is a taper effect until then. From October the duty will return to normal levels so if you meet the deadline you stand to save £2,500.

So your priority now is to move as fast as you can – respond to any requests, supply all the documents required by your adviser or lender and get back on anything outstanding with your solicitor. That applies whether you are a buyer or a seller or both.

It’s a priority to respond to those requests because there are so many people involved in the buying process: estate agents, solicitors, mortgage advisers, mortgage lenders, buyers, sellers….and that’s where the delays happen. Make sure you’re not slowing things down more.

What are the stamp duty rules now?

If you’ve completed before the end of September and the property costs under £250,000, there will be no stamp duty due. From October the levy will be £2,500.

A £300,000 home completing before 30 September will be subject to £2,500 in tax. In October this increases to £5,000.

A £500,000 residential purchase completed before the end of September will incur £12,500, increasing to £15,000 in October. So generally you are saving £2,500.

Will there be another extension to the stamp duty holiday?

The simple answer to this is no. We’re still seeing some benefits as the levy is tapering, but there are no plans to extend and if there were plans, we would probably know by now.

Most of our clients that have yet to complete seem to have budgeted for paying stamp duty anyway – they’ve planned for the possibility of missing the 30 June deadline.

Hopefully the deadline won’t cause too many home purchases to fall through. Fall throughs happen for all kinds of reasons but it would be a great shame to lose a house because you haven’t budgeted to pay stamp duty.

What should I do if I’m now liable for stamp duty?

The main thing to do is to check how much you will need to pay and make sure you can raise the necessary funds. If you have any questions or concerns about stamp duty or any part of the home-buying process, talk to a mortgage adviser. They will be happy to help.