HomeOwners Alliance logo

Sign up to our newsletter for the latest property news, tips & money saving offers

  • Can I move during lockdown? Read latest advice

Will the stamp duty holiday be extended?

Extensive delays in the homebuying process means even if you start now, you could miss out on the stamp duty holiday. So will the government extend the deadline? And what can you do to speed up your sale?

6 minute read

Will the stamp duty holiday be extended?

Well, the stamp duty holiday has certainly worked. The government launched the tax break as part of its “Plan for Jobs” in July and by September reported a 20% increase in property transactions as well as reporting that 33% of homeowners wanted to spend the savings on home improvements, further boosting businesses and jobs.

OK, that 20% increase could have been post-lockdown pent up demand. And yes, most homeowners spend money improving their new homes anyway. But you can’t argue that the stamp duty holiday has stimulated the housing market.

Why should the stamp duty holiday be extended?

The trouble is, the stamp duty holiday may have over-stimulated the market.

In October, Zoopla reported that record high sales agreed post-lockdown have led to some 140,000 more homes progressing through the system than at this time last year.

But as more people try to take advantage of the tax holiday, every part of the home buying industry is struggling to meet demand due to covid restrictions on their operations.

Delays in mortgage approvals, conveyancing work, local searches and surveyors are so bad that the average property transaction time has gone from 12 weeks to 20 weeks.

Even those homebuyers that have started the process of buying a home this side of Christmas are at risk of missing out on tax savings up to £15,000 if they fail to complete by the 31st March deadline.

As a result members of the industry have written to government asking for an extension. Clearly there’s an argument that consumers shouldn’t be faced with a huge tax bill when they started the process in good faith of meeting the stamp duty holiday deadline.

But will the stamp duty holiday be extended?

At present, the government has said there is no plan to extend the stamp duty holiday.

It may be that the government is waiting to see how the economy is shaping up at the start of 2021 before deciding. Recent announcements have shown that last-minute national policy changes are getting to be part and parcel of the “new normal”.

There is a hope that the Chancellor won’t want to do anything that could threaten the housing market which is just getting back to business and which is essential to economic confidence and so many related jobs.

We do however wonder if a six month extension, as being asked for by many industry groups, would be enough. It could act to simply shift the cliff-edge to later on in the year.

We are hoping instead the Chancellor will look to make the change more permanent, so those buying a home to live in do not pay any tax up to £500k.  People buying a second or investment property could continue to pay the 3% surcharge and foreign investors are about to be hit with a 2% stamp duty surcharge from April 2021. These changes send the right message: homes should be for living in. First time buyers already benefit from no tax on the first £300,000 so maintaining the exemption to £500,000 will give their buying power a much needed boost.

We also know that stamp duty is a huge barrier to downsizing. Speaking to Mortgage Strategy, Kevin Roberts at Legal and General said, “…as much as 26 per cent of all UK housing stock is owned by last time buyers. Removing this barrier hasn’t just helped the older generations to downsize. It has encouraged further transactions down the ladder too in making available larger properties for growing families, freeing housing stock for Britain’s first-time buyers.” An obvious win-win – and one which could ultimately raise revenue for the government by boosting the number of housing transactions.

Alternatively, there are suggestions that the Chancellor could allow cases, which have reached a certain point in the house buying process, to continue without being required to pay stamp duty land tax (SDLT), even if they surpass the March deadline.

We wait and see. In the meantime…

How can I make sure I meet the stamp duty deadline?

1. Find a local estate agent with a good track record

Sellers can use our estate agent tool to find the best local estate agent based on how quickly they sell, how often they achieve asking price, their success rate and more

Find and Compare Local Estate Agents

This form will take you to www.estateagent4me.co.uk for the results

2. Sellers should instruct a solicitor as soon as you list, and buyers as soon as your offer is accepted

You can compare quotes now from conveyancing solicitors and speak to them about the process and costs so you’re ready to instruct them.

3. Opt for a legal team using a digital platform

They can complete transactions quicker. Digital Move claims cases can be completed up to 6 weeks quicker. Look for the Digital Move logo when you search for your conveyancing firm.

4. Sort your Energy Performance Certificate

Also known as an EPC this has to be included with a sale by law. It shows how energy efficient your new home is and if you moved in within the last 10 years, yours is still valid. Here’s how to check if you have one or how to get one if you still need to.

5. Get your paperwork together

If it’s a leasehold, find the lease. Locate certificates showing compliance with regulations of any works done from planning permissions to FENSA certificates for window replacements. Don’t forget valid guarantees a home buyer will want to see. Here’s a list of essential documents to get ready

6. Get a mortgage agreement in principle before you make an offer on a property

Many lenders and brokers are experiencing COVID related delays and mortgage choices have significantly reduced, especially for first time buyers. Avoid wasting time later down the line and start the mortgage process now.

7. Home buyers insurance

In uncertain times like these, home buyer protection insurance covers buyers for some of their legal and survey costs as well as mortgage lending fees should your purchase fall through.

8. Build in time for local searches

Covid-19 and now lockdown restrictions mean many local authorities are struggling to supply their own searches and also to provide access to data for personal search companies.

If you are moving within an area you know well, then “no search indemnity insurance” will cover you if one or more searches do not come through before you need to exchange. But you’ll need to check your lender would be happy to lend on that basis. For more information see our guide, with details of what to consider and information on local delays.

9. Plan for the worst case scenario

While we’re calling on government to change the stamp duty regime and to rethink the 31st March deadline,  there is no guarantee this will happen. And the home moving process is an uncertain one at the best of times.

If you are buying, you should cost in the additional stamp duty rate in the event you complete after the 31st March 2021 and make sure you have a contingency to make that payment. Sellers may also want to check their buyers could afford the additional tax if this did happen. When push comes to shove, if you need to pull out of the transaction, both parties can legally do so without financial consequences before exchange of contracts.

Is now a good time to buy and sell?

With demand outstripping supply, we are clearly in a market that favours the seller. As asking prices continue to hit a record high as people rush to take advantage of the tax break, according to property portal Rightmove, rushing to buy could prove a false economy.

Figures from Rightmove revealed last month that average asking prices for homes are now nearly £17,000 higher than last year.

Those wondering if now is the right time to buy and sell must weigh up the maximum £15,000 saving from the stamp duty holiday against how much extra they will pay for a property in a seller’s market. If buying and selling, the gains are relative – it may be the case that the extra you will pay is balanced out by the fact you will get more for your home too.

 

Stamp Duty Calculator for England & NI, Scotland and Wales

1. Select your location

Please select a location for your property

2. Enter your property price

£
Please enter a value for your property over £10,000

3. Are you a first time buyer?

Please let us know if you are a first time buyer

4. Is this an investment purchase or second home?


Leave a comment* Required

  1. Homeowners Alliance No comments yet.

Related Articles

Stamp duty holiday and how it works

Stamp duty holiday and how it works

Can I still view, buy, sell and move house if I'm in tier 1, 2 or 3?

Can I still view, buy, sell and move house if I'm in tier 1, 2 or 3?

How long does it take to buy and sell a home?

How long does it take to buy and sell a home?

Latest News

View all news articles

 
close pop-up ×

Sign up to our FREE weekly newsletter

For the latest news, advice and exclusive money saving offers.

×