The recent High Court judgment in Euro Accessories Limited  EWHC 47 (Ch) has shed some light on the interpretation of “fair value” for a compulsory transfer initiated by a...
Extended stamp duty holiday deadline looms for homebuyers
The stamp duty holiday is set to end on 31 March 2021 and the government has indicated that it won’t be further extended despite pressure from within the property industry to do so. Calls for another extension have been prompted by fears that homebuyers will be hit with an unexpected tax bill of up to £15,000 as the demand created by the holiday could lead to delays in processing some transactions until after the deadline.
The temporary measure raised the property value threshold for paying stamp duty from £125,000 (or £300,000 for first-time buyers) to £500,000. It was originally introduced last July in an attempt to kickstart the property market following the first lockdown that was implemented as a result of the pandemic.
The imminent return to the previous stamp duty regime has prompted a flurry of activity in the housing market in recent months in order to take advantage of the higher threshold.
Concerns that the stamp duty holiday has had unintended consequences appear to be reflected in statistics set out by Rightmove. It notes that the average time between acceptance of an offer and completion has risen to 126 days and that 613,000 sales that were agreed in 2020 are still to be completed due to the backlog.
With the average time required to complete a purchase/sale under normal circumstances being around 100 days, it’s highly likely that any transactions undertaken from this point onwards will be subject to the previous stamp duty thresholds. Depending on the value of the property in question, the amount of tax payable ranges between 2% and 12% (and up to 17% for foreign investors). A further 3% surcharge is also levied on owners of multiple properties.
But it is possible that missing the deadline may not have such a negative outcome. There are now signs that demand is beginning to slow down to normal levels. Going forward, demand is expected to reduce which, in turn, is likely to deflate house prices. Therefore, the requirement to pay stamp duty again from April may be offset by a reduction in the sale price.
Top tips for buyers/sellers to help speed up a transaction:
- Avoid transactions that involve a long chain. New builds or buying through a property auction can be good options to allow this.
- Engage a proactive solicitor and mortgage broker. Ensure that you keep in regular contact with your estate agent and solicitor throughout the process whilst being careful not to chase too much as this may damage the relationship with them and cause unnecessary delay.
- Check to ensure that you have all the necessary documentation in order, such as ID, proof of income and bank statements.
- Select and apply for a mortgage as soon as possible and, if possible, before you begin your property search.