What is stamp duty and what does the stamp duty holiday mean for me?

Anyone who has dealt with a mortgage lender in the past few months has probably experienced delays that have, at least in part, put down to a deluge of new applications caused by the stamp duty holiday.

But what does this actually mean and why are so many people bringing forward their property purchase plans to take advantage of it?

Stamp duty, or Stamp Duty Land Tax (SDLT), to give it its full name, is usually paid on property transactions in England and Northern Ireland with a contract value of over £125,000, or over £300,000 if you’re buying for the first time. If you’re buying in Scotland these thresholds are £145,000 and £175,000; and in Wales it’s £180,000 across the board with no favourable treatment for first time buyers.

If you’re over the threshold it isn’t cheap either, which is why so many people are trying to take advantage of some temporary generosity from the Chancellor, Rishi Sunak. Those looking to buy must legally complete prior to 31st March 2021 to have their SDLT waived, as long as the purchase price is less than £500,000. Given that the average price of a home in the UK is approximately £250,000, the majority of transactions prior to 31st March will qualify for zero stamp duty if they beat the deadline.

The rates for SDLT looked like this in England and Northern Ireland prior to the holiday, and at present this is also where they will return on 1st April 2021:

A house purchase at the average value of £250,000 in England and Northern Ireland would therefore have attracted a basic SDLT rate of 2% on £125,000; or a bill of £2,500.

The additional SDLT rate applies to those who already own property in the UK and will effectively have more than one property on completion. Landlords can still save on the basic SDLT rate for property purchases of less than £500,000, but the additional rate will still apply.

Given the potential tax savings, it therefore isn’t too surprising that many people have brought forward their moving plans to beat the deadline and pocket what they would have paid on stamp duty. The downside to all of this is the stress caused by the looming deadline, and the knock-on effect on the parties required to meet the 31st March date.

Solicitors who deal with property transactions are working to capacity with more than triple their usual workload at this time of year, and lenders are in a similar position. Many solicitors have started to turn away work given the time pressure to complete property deals.

As with all professionals, it is important to let property lawyers know of your intentions to beat the deadline, and let them know that your funds are dependent on not paying SDLT if funds are tight. It is also vital to use the right lender to ensure there are no undue delays in getting the mortgage – the lawyers cannot legally complete the deal on time if the mortgage lender doesn’t perform.

Smartr Finance have access to lenders who can produce offers of mortgage funding within days rather than weeks, and have regular communication with lenders about turnaround times. If a quick mortgage offer is important to you, Smartr Finance can assist given their whole of market access for mortgages.