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How to make the most of the stamp duty holiday extension

How to make the most of the stamp duty holiday extension

The extension of the stamp duty holiday was welcome news for buyers and investors – and it’s looking like a busy spring lies ahead for the London property market. But with the new stamp duty deadline of June 30 now in place, the race is on to complete in time to maximise the savings on offer.

Here, we’ll look at the current stamp duty rates and the changes to the property tax that are coming up later in 2021.

We’ll also provide some tips on the things you can do to make sure you capitalise on the stamp duty savings before the deadline…


Current stamp duty rates

The introduction of a stamp duty ‘holiday’ in July 2020 means buyers in England and Northern Ireland pay no tax on the first £500,000 of a property’s purchase price. That means savings of up to £15,000 are on offer.

And while the ‘holiday’ was originally due to end on March 31, it’s now been extended, with the same savings available until June 30, 2021.

That means, until June 30, buyers in England will pay the following rates of stamp duty:


Portion of purchase price

Stamp duty rate

£0 - £500,000

0%

£500,001 - £925,000

5%

£925,001 - £1.5m

10%

£1.5m +

12%



New stamp duty: The rates you’ll pay in 2021

The current stamp duty ‘holiday’ ends on June 30, 2021 – although the savings on offer will be tapered through until September 30.

From July 1 until September 30, buyers in England who aren’t first-time buyers will be exempt from stamp duty on the first £250,000 of a property’s purchase price. That means the following stamp duty rates will apply between July 1 and September 30:


Portion of purchase price

Stamp duty rate

£0 - £250,000

0%

£250,001 - £925,000

5%

£925,001 - £1.5m

10%

£1.5m +

12%


From October 1, 2021, the exemption threshold drops to £125,000, so stamp duty rates will be as follows:


Portion of purchase price

Stamp duty rate

£0 - £125,000

0%

£125,001 - £250,000

2%

£250,001 - £925,000

5%

£925,001 - £1.5m

10%

£1.5m +

12%


Landlords buying rental properties and those purchasing second homes will continue to pay a 3% additional property surcharge on top of all rates.


Do first-time buyers have to pay stamp duty?

Under the current stamp duty rules, until June 30, 2021, first-time buyers are exempt from stamp duty on the first £500,000 of a property’s purchase price. From July 1, 2021, however, you’ll pay no stamp duty on the first £300,000 if you’re a first-time buyer purchasing a property costing no more than £500,000.

For properties costing more than £500,000, first-time buyers must pay the standard rates of stamp duty from July 1.


What constitutes a first-time buyer for stamp duty?

In order to be eligible for the first-time buyer stamp duty exemption of £300,000, you must:

• Have never owned a home before, including inherited property

• Both have never owned a property before if you’re buying as a couple

• Be buying a property that costs no more than £500,000

If you’ve owned commercial property before, or you currently do, but you’ve never owned a residential property, you would still qualify as a first-time buyer as long as the commercial premises you own doesn’t have a residential dwelling within it.


Five things you can do to capitalise on the stamp duty holiday

If you’re buying a home and the process is under way, you’ll need to complete your purchase by no later than June 30, 2021 to pay no stamp duty on a property costing £500,000 or less.

If you’re unable to complete by that date, but can complete before September 30, you’ll pay no tax on the first £250,000 of your property’s purchase price (or £300,000 if you’re a first-time buyer purchasing a property for less than £500,000).

So, what can you do to make sure you beat those deadlines? Here are five tips that can help…


1. If you haven’t found a property, you’ll need to be quick

According to Rightmove, the average time to complete a property purchase currently is 126 days.

That means if you have an offer accepted at the beginning of April, you’d complete at the beginning of August – in time to pay no stamp duty on the first £250,000 of your property’s purchase price, or £300,000 if you’re a first-time buyer purchasing a property worth £500,000 or less.

However, if all your affairs are in order you could still complete before June 30, take full advantage of the stamp duty ‘holiday’ and maximise your savings. To give yourself the best chance of completing before June 30, you should:

• Have an offer accepted as soon as possible

• Get a mortgage Agreement in Principle (AIP)

• Make sure all your documentation is to hand

• Try to avoid ending up in a chain

• Hire a proactive and efficient solicitor


2. Consider buying at auction

Buying a property at auction can be considerably faster than purchasing one on the open market – giving you a much better chance of beating the new stamp duty deadlines. That’s because auctions have strict exchange and completion timeframes.

At a traditional auction, where properties go up for sale at an auction house, the buyer and seller exchange contracts as soon as the hammer falls and then have 28 days to complete the transaction.

Under the Modern Method of Auction, which is usually online, the timeframe is slightly longer, usually 56 days, but can still be much faster than buying on the open market. With both methods, if you purchased a property at auction before the middle of April 2021, you’d complete in plenty of time to beat the June 30 deadline and enjoy the biggest savings on stamp duty.


3. Look for a property with a short chain – or no chain at all

When viewing properties to buy, find out as much as you can about the seller’s situation from the estate agent.

Are they buying a property themselves and are the sellers of the property they’re buying, also buying?

Ending up in a long chain like this could mean a much longer sales process and you may miss out on the stamp duty savings on offer.

If you’re keen on more than one property and making savings from the stamp duty ‘holiday’ is high on your list of priorities, the property to buy is the one with the shortest chain.


4. Work with a proactive solicitor

Choosing the right solicitor or conveyancer to do the legal work on your property purchase can sometimes be the difference between a fast transaction and long, slow and drawn-out process.

Hiring a proactive solicitor is key if you want to beat the stamp duty deadlines, so get recommendations from friends and family and look for firms with a solid reputation for completing transactions quickly and efficiently.


5. Be proactive yourself – especially when it comes to documents

While a good solicitor often holds the key to a quick property purchase, you have a big role to play as the buyer, too.

If you’re about to embark on your property search, the first thing to do is get a mortgage agreement in principle in place – this puts you in a good position as a buyer and means you’re as ready to proceed as you can be when you find your dream home.

Also, get all your documentation in order before you start your search – that way, you’ll be able to put your hands on everything you need once you have an offer accepted. And once your conveyancing and mortgage application process are under way, don’t be afraid to chase your solicitor or lender if you feel they could be doing more to speed up your purchase.


Is the stamp duty holiday going to be extended again?

The government has no plans to extend the stamp duty ‘holiday’ beyond its June 30 and September 30 cut-off dates.

The stamp duty holiday was extended from its original March 31 deadline to avoid a ‘cliff-edge’ scenario that would have potentially seen many buyers facing a large stamp duty bill if there were unable to complete their purchases in time.


Further reading…

There are major savings to be made from the stamp duty ‘holiday’ if you’re thinking of buying an investment property to rent out – but where are the best places to purchase a buy-to-let in London? We’ve got all the answers here.

And if you’re a first-time buyer looking to get that first foot on the property ladder, you may be considering a Help to Buy equity loan. Our Help to Buy guide tells you everything you need to know about the scheme.