Stamp duty holiday extended until September 2021
It was widely expected that the Chancellor would announce in the budget a further extension of the Stamp duty holiday for England and Northern Ireland until September 2021, and this was duly delivered. In July 2020, at the height of the pandemic when there were serious concerns the property market might collapse, Stamp duty was suspended on the first £500,000 of property sales used as a main residence (a buyer can now save £15,000 on the purchase of a house worth £500,000). While the holiday does not remove stamp duty entirely, it reduces the amount paid for higher value transactions considerably. It was expected this holiday would come to an end at the end of March 2021, leading to worries of property value falls and in-progress sales not making the cut-off. As a result of the extension, many buyers and sellers will be breathing a sigh of relief.
The impact on the treasury of the stamp duty holiday will be considerable, however, seriously denting the £12bn each year they gain from the tax (this is 2% of all tax received).
Conveyancers plea for a new approach
The stamp duty holiday is financially beneficial for buyers and sellers (as it will also drive up asking prices), but from the perspective of conveyancers pushing sales through, it poses challenges. Not only does the holiday drive up demand, but it also increases the volume of conveyancing transactions which need to be managed from a legal standpoint. Simon Law, who represents the Society of Licensed Conveyancers (SLC), believes that the holiday has created a cliff-edge which places enormous pressure on all parties, including local authorities, lenders, lawyers, and search companies; “The SDLT ‘holiday’ has had the effect of injecting an unsustainable stimulus into the market. Bringing it to an end with a ‘cliff edge’ expiry date will result in a postcode lottery worth several thousand pounds to some and not others and has already created considerable stress on buyers, lawyers, lenders, search companies and local authorities amongst others”. By moving the deadline for the holiday by six months, this ‘cliff edge’ is also moved. Indeed, the SLC believe that the market would have been strong anyway without the holiday, and this would have allowed natural market forces to resume. They also take the view it would have been better to put a deadline on when a purchase has been formally instructed, then allow a year for this to complete in order to qualify for the holiday.
Another key consideration is that any stimulus which puts stakeholders under pressure to meet a deadline can lead to mistakes being made. In practice, all conveyancers should work from the standpoint that they must complete the purchase process in a thorough manner as necessary to protect the interests of their client. Bearing in mind it is now taking 160 days from listing to exchange, some properties going on the market on the day of Mr Sunak’s budget may not complete in time to benefit from the holiday in September 2021. House sales that are agreed in the Spring and Summer will have less time to complete, leading to potential pressure from buyers to skip parts of the conveyancing process, which is intended to protect their interests.
According to Tom Scarborough, chief executive and founder of Movewise, there is substantial pressure to meet the stamp duty holiday deadline, but that buyers and sellers need to be open and honest with each other regarding the reality that this may not happen if time is simply too tight; “Buyers are still keen to beat the stamp duty deadline and sellers need to be aware of that before accepting an offer. To avoid transactions collapsing, any offer being made now should be on the understanding that completion is likely to be after the tax holiday ends. If required, buyers and sellers should enter into any negotiation on price before the conveyancing process commences. An honest and frank discussion upfront could avoid a transaction failing further down the line after money and time has been spent on searches and surveys”. It is likely that such conversations will be essential as the months count-down towards the new stamp duty deadline in order to avoid transactions from falling through.
The Chancellor’s announcement that the stamp duty holiday is being extended until September will come as a relief to all stakeholders in ongoing property transactions and for new buyers/sellers hoping to benefit in 2021. As we have seen, however, the new deadline will not alleviate the pressure this causes, it will merely be delayed.
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have highly experienced property law teams who can assist you with all matters relating to conveyancing and stamp duty. To make an appointment, please call us on 01932 840 111