We’re hoping to complete on a £510,000 home before the stamp duty changes on 1 April.
It’s touch and go and although we’re on the verge of being able to exchange there are still some final legal queries to be settled.
As we are first-time buyers, if we fail to complete in time we will see out stamp duty bill rise from £4,750 to £16,000. That’s a £11,250 increase.
The seller had originally agreed to exchange contracts and complete almost simultaneously so that we could make the deadline.
However, if for whatever reason it doesn’t happen in time, should we insist to the vendor a lower price to make up for it?
Buyers now have less than a week until the nil-rate threshold under which no stamp duty is paid drops from £250,000 to £125,000
David Hollingworth replies: There have been several periods in recent years where there’s been some relaxation to stamp duty land tax and, in some cases, to the equivalent taxes in Scotland and Wales.
The common thread to all has been that there’s inevitably a rush to complete before the ‘holiday’ ends.
The current relief in England was put in place as part of the now infamous ‘mini budget’ of September 2022 and was one of the few measures that wasn’t rapidly unwound.
However, what was originally intended to be a permanent reform was instead given a temporary lifetime, which is now coming to an end.
The change saw the nil rate band doubled from values of £125,000 to £250,000. First time buyers were already eligible for a more favourable regime but the property value bandings were extended for them too.
That saw the nil rate band for first time buyers increased up to £425,000 and for partial relief on purchases of property up to as much as £625,000.
That extended the relief from a zero rate for the first £300,000 of properties with a purchase price of up to £500,000.
The rates will now revert back to the original levels for all buyers from the 1 April. With a purchase price of £510,000 you will be amongst the hardest hit by the rates snapping back to their original level, if you can’t manage to make the completion deadline.
The extended relief would see the property value qualify for first time buyer relief and mean a charge of £4,250 (5 per cent on the £85,000 between £425,000 and £510,000).
If the deadline is missed then the purchase price will be outside the first time buyer relief stipulation of £500,000, meaning standard rates will apply, lifting the charge to £15,500.
The best result for all parties is to reach exchange quickly and allow enough time for completion by the end of the month.
It’s worth underlining that exchange will commit you to the transaction but it is completion that is the key date for the stamp duty deadline.
As you highlight it can often be the legal side of things that will take time to iron out.
It’s important to keep in close contact with your conveyancer so that you can understand where the delay is and how close to resolution it may be.
There may be issues outside the control of both you and the vendor. Your conveyancer will certainly be putting effort into pushing things along but will need a prompt reaction to any enquiries or requests from you.
The hike in cost will have a knock-on impact and eat into funds that could otherwise have been deployed as part of your deposit.
It could be difficult to work out who, if anyone, is at fault for delays, especially if there is a longer chain and third parties like freeholders involved.
It may depend on when the process started and how realistic the deadline was in the first place.
However, if it will affect your ability to complete the transaction then it may require a renegotiation of the purchase price.
Dropping the price back to £500,000 for example will once again allow you to benefit from the first-time buyer relief.
Even so, it would still mean a higher stamp duty bill of £10,000.
Your vendor may be prepared to compromise rather than risk the sale collapsing altogether but you’ll need to balance that with how it could affect other transactions in the chain.
It’s generally expected that the end of the stamp duty holiday could simply bring transactions forward and could even see a lull once it closes.
However, if the vendor isn’t under the same time pressure and feels there will other buyers waiting in the wings, they may take a chance on achieving the current price or more.
If your heart is set on buying the property either way, it will make sense to have a contingency plan in place, so that you have funds available to bridge any gap.
Keep in touch with your conveyancer and good luck on hitting the deadline.
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