Building society bosses have urged the Government to extend the Stamp Duty holiday for buyers in a bid to hold the property market but so far, the Government haven’t shifted their position on the end date of the Stamp Duty tax cut scheme.
With up to £15,000 at stake, many are desperate to meet the Stamp Duty deadline which could make a huge difference to buyers, who otherwise wouldn’t be able to afford their chosen property.
So, is there still time to meet the deadline and if so, how can buyers speed up the process?
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When is the Stamp Duty deadline?
When you buy a property, you usually have to pay Stamp Duty Land Transaction Tax on the amount over £125,000, or if you’re a first-time buyer, £300,000.
However, on the 8th of July 2020, that all changed.
The Chancellor of the Exchequer announced a temporary Stamp Duty holiday that cut the rate of Stamp Duty to 0% for all properties valued at £500,000 or under until the 31st of March 2021.
An incentive for many buyers, the absence of Stamp Duty provides an opportunity to make significant savings.
It’s clear the Stamp Duty tax cut has encouraged property transactions given that the Government estimates suggest that nearly 9/10 people getting on or moving up the property ladder will pay no Stamp Duty at all during the holiday.
How is Stamp Duty charged until April, 2021?
Stamp Duty %
£0 to £500,000
£500,001 to £925,000
£925,001 to £1,500,000
Will buyers make the deadline?
Some people may be shocked to learn that despite the deadline being a few months away, backlogs built up through the covid-pandemic and subsequent lockdown, may hinder their plans.
The closure of the property market in the first lockdown from March to July, caused a brutal backlog for many within the industry and although the property market is open and bustling for business, some estate agents, brokers, lenders and conveyancers are still catching up in order to process applications before the deadline hits.
Unfortunately, this delay could result in many missing out on the Stamp Duty cut and consequently, thousands of pounds of potential savings.
Housebuilders have pleaded with the Government
In a bid to stimulate the level of demand within the housing and property sector and help buyers get their desired homes, housebuilders and property professionals have pleased with the Government to increase the Stamp Duty deadline so that those who have gained approval for a mortgage by the 31st of March can still be eligible for the tax cut.
As it stands, to be eligible for the Stamp Duty tax cut, a buyer’s property transaction must have completed by the deadline. That means that people who gain a mortgage approval but do not complete their property purchase by the 31st of March 2021, will currently miss out on the Government scheme.
Many fear that completely closing the doors to buyers who would have otherwise made the deadline had it not been for the delay caused by lockdown, could cause a catastrophic “cliff edge” effect, with buyers walking away from transactions.
Petition for Stamp Duty extension rejected
A petition asking for a 6 month extension on Stamp Duty, which gained over 22,000 signatures, was rejected by the Government who have instead responded saying,
“The Stamp Duty land tax holiday was designed to be a temporary relief to stimulate market activity and support jobs that rely on the property market. The Government does not plan to extend this temporary relief.”
Is it easier to meet the Stamp Duty deadline as a first-time buyer?
First-time buyers who aren’t locked in a property chain and have a cash deposit ready are arguably in a better position to secure the Stamp Duty tax cut, as they aren’t reliant on the proceeds of a former property to make the purchase.
Chain free homes, like New Builds which may qualify for schemes such as Help to Buy, are a popular choice for buyers who also benefit from not having to wait for current occupiers to move out.
From 1 April 2021, buyers will have to resume paying Stamp Duty on portions of the price of a New Build home above £125,000 but until then, it isn’t chargeable.
Can a buyer meet the SDLT deadline if they’re waiting to sell their current house?
If a buyer is in the process of selling their current property, meeting the Stamp Duty deadline could be a tight squeeze, especially if they’re yet to market the property and are relying on the proceeds of the sale to fund their next property purchase.
Property chains are common and can unavoidably slow down the process of selling and buying a property. Ideally, a person(s) would sell their property quickly, giving them access to the cash they need to buy their next one. However, as is often so common, that isn’t the case.
That’s because there are lots of factors that can slow down the process of selling a house. For example, the person who wants to buy the property may not be a cash buyer, leaving the seller waiting until the buyer has finance.
This could take anywhere between 6 - 12 weeks and then additional time may still be needed to search and view a new property to buy, which could in some cases, take another 6 weeks.
Therefore, a person would need to market and sell their current property and thereafter, complete their next property purchase by the 31st of March, 2021, to meet the deadline.
Selling a property in time for the Stamp Duty deadline
It’s a tight squeeze but if you’re determined to meet the Stamp Duty deadline and you’re selling your previous property, organise any necessary documents and paperwork in preparation for the sale.
This could include:
A copy of the lease (if the property is leasehold)
Documentation related to the freehold (if the property is freehold)
FENSA certificates for replacement windows
Your Energy Performance Certificate (EPC)
Relevant building restrictions
Building regulation certificate when alterations have taken place
A Gas Safety certificate for a new boiler
Buying a property before the Stamp Duty deadline
Estimates from property portal Rightmove suggest that there were 67% more property transactions in November 2020 in comparison to the previous year. That’s a staggering 650,000 sales and with the deadline looming, demand is only expected to increase.
Whether people are purchasing a pre-loved property or a New Build, there are a few things they can do to make the process as smooth as possible.
How can I buy a house in time for the Stamp Duty deadline?
Remember, to meet the Stamp Duty deadline, a buyer would need to:
Find a lender (unless a cash buyer)
Find a property
Put in an offer
Get a survey of the property
Have their solicitor check any legal documentation and contracts
Exchange i.e. pay their deposit
Complete the transaction i.e. transfer the rest of the funds either from a mortgage or the proceeds of a previous sale
Help with meeting the Stamp Duty deadline
With so much to do, some people seek the guidance of a mortgage broker. It’s their job to use their experience of the market and mortgage process to detect and resolve any issues that could cause delays or prevent a person from successfully completing.
Ever aware of the costs involved with buying a property and borrowing money for a mortgage, our brokers work intelligently to find the most practical solutions for residential and buy-to-let mortgages.
They can liaise with solicitors and the relevant professionals to alleviate tasks and push a mortgage application through without error or delay.
There are also some practical things that buyers can do, to help avoid any bumps along the road.
Have a deposit ready
Lots of lenders are asking for 15% deposits, though the size of a deposit will vary depending on the buyer’s circumstances including how much they earn, the regularity of their income, their credit score, age and even the type of property they’re buying.
Saving a deposit between now and the Stamp Duty deadline may be a task for some buyers, which is why some turn to parents for gifted deposits which can boost deposit sizes and sometimes help buyers get better deals on their mortgages.
Find paperwork and legal documents
This could include bank statements, saving account statements, payslips or a SA302 if the buyer is self-employed.
Legal documents such as a passport, driver’s license or birth certificate will also be needed to prove identification.
Find a lender to approve a mortgage
This is an important stage of the process given that the wrong mortgage could result in wasted money, spent on interest or fees that could have been less, or better still, non-existent elsewhere.
Finding a lender to approve a loan can be time consuming and tedious, with hundreds of banks and lenders each offering different terms and conditions for varying products.
Mortgage brokers use their access to the market to compare a vast range of rates, filtering out irrelevant options that buyers aren’t eligible for and highlighting the ones that meet their needs.
Keeping in regular contact with all parties involved can help a buyer to oversee the stages and preempt what comes next. If time is an issue, as it often is, a mortgage broker’s help can be invaluable as they can contact the relevant people on a borrower’s behalf and chase up any one causing delays.
Stamp Duty deadline FAQS
What happens if I can’t complete before the Stamp Duty deadline ends?
From 1 April 2021 (or for any properties valued over £500,000 between 8 July and 31 March 2021), buyers will be penalised for a late or missed Stamp Duty payment.
There are two main types of penalties: on submissions and payment. If buyers have to pay Stamp Duty on a new home, they’ll need to get HM Revenue and Customs (HMRC) to stamp their documents and this needs to happen within 30 days of when they’re signed and dated.
Does the Stamp Duty deadline apply to buy-to-let investors?
There has also been a Stamp Duty cut for buyers of additional properties, including second homes or buy-to-let investments and yes, the Stamp Duty deadline applies to these transactions too.
The new rate for additional properties starts at 3% up to £500,000, so for a buy-to-let property valued at £400,000, the buyer would save £10,000 in Stamp Duty.
This has provided an advantageous opportunity for buy-to-let investors seeking a good deal, with British landlords snapping up undervalued property to avoid paying the estimated £74m in Stamp Duty charges.
Meeting the Stamp Duty deadline with The Mortgage Hut
We have experts ready to help and raring to find the most efficient and practical solution to homeownership, whether that be before the 31st of March, 2021 or in the future in time for upcoming Government schemes such as the First Homes Programme.
It’s never too early to start planning for a property purchase and our team have the right tools and knowledge to help make that possible. Call 023 8098 0304 or fill out an enquiry form to learn more.