As we approach the Stamp Duty Land Tax (SDLT) holiday deadline on 31 March, many buyers and sellers are feeling the pressure to get their property transactions over the line to make significant tax savings Read more...
As we approach the Stamp Duty Land Tax (SDLT) holiday deadline on 31 March, many buyers and sellers are feeling the pressure to get their property transactions over the line to make significant tax savings before it is too late.
What is the Stamp Duty Land Tax holiday?
The government’s Stamp Duty holiday – brought in to assist the property market during COVID-19 –has enabled many residential property buyers to save thousands of pounds on their purchases. Currently, any property valued below £500,000 is exempt from the tax, however, after 31 March, buyers will have to pay Stamp Duty on all property purchases over £125,000.
Although an extension of the SDLT holiday is due to be debated in parliament on 1 February, it is highly advisable to prepare for the deadline currently in place.
While 31 March may seem a long way off, it does not leave much time for property transactions to go through the legal process and be finalised. As such, if you have recently bought a property, or are hoping to buy a property with the anticipation of completion before the Stamp Duty holiday deadline, there is a possibility that this may not be achieved.
What to do if your property purchase is still in process
If you have any concerns regarding the legal process of your property transaction, you should contact your solicitor as soon as possible; they are best placed to advise on the best course of action.
The following points outline some recommended next steps which may help you to clarify the status of your transaction, and potentially move it along at a quicker pace:
- Be open with your solicitor: Let your solicitor know from the outset whether it is your intention to proceed with your purchase or sale on the basis that the holiday must apply to your particular transaction.
- Be aware of a delayed transaction: Although solicitors will do their best to mitigate any hurdles, the speed of the transaction is largely outside of their control and they cannot guarantee that transactions will complete before 31 March 2021. This is especially the case where the transaction forms part of a chain. The solicitor is often the last link in the move, and it is only when the solicitor has all the pieces, which are often dependent on obtaining from others, that buyers and sellers can move forward.
- Fall-back clauses: You might need a fall-back clause in your contract making it clear that the contract is conditional on the SDLT concession being available and that you will not proceed without it – this would need to be agreed across chains which may not be easy to achieve.
- Bear in mind others in the chain: If you still want to proceed even if the SDLT concession is not available, others in the chain may not, which may mean that you or others in the chain will not be able to proceed in any event. If you still wish to go ahead, consider carefully if you will have the funds available to do so. Especially if you are in a chain, you will need to understand the compensation payments – that might include unanticipated SDLT – if completion does not take place when expected or at all.
- Possible additional SDLT: If you exchange contracts but do not complete on the completion date, you may become liable for SDLT and not only on your own transaction.
- Check with your lender: For those taking out mortgages, some lenders may have or will impose a condition in the mortgage offer that the transaction can only proceed provided that the SDLT concession is available. If you are proceeding with a mortgage then you will need to check with your lender if this applies to your offer.
- Property searches can save time: If you are a seller and would like to speed up the processing of your transaction, it might be worth having a search carried out on your property to save time. Where such searches are available, and meet your requirements as well as that of your lender and solicitor, they may assist in reducing timeframes.
If you wish to understand more about the SDLT holiday deadline and how it may impact your property transaction, please contact our experienced Residential Real Estate solicitor, Jonah Michael.