Yahoo Finance How you can still save £2,500 even if you missed the stamp duty deadline
Many first time buyers and house movers had been racing to complete ahead of the June 30 stamp duty holiday deadline in a bid to save thousands of pounds.
But if you failed to clinch the deal and get your purchase across the line in time, all is not lost.
This date only marked the end of the first phase of the freeze on stamp duty which gave a ‘nil-rate band’ on property purchases up to £500,000.
From July 1, the holiday continues, but at a lower threshold of £250,000 until September 30.
This means that for the next few months, if you are buying for less than £250,000, you still don’t have to pay a penny in stamp duty.
If your dream home costs more than this, you can still save up to £2,500 if you can seal the deal before the autumn.
What is the stamp duty holiday?
This tax break in England and Northern Ireland was introduced by Chancellor Rishi Sunak in June last year to give buyers some support, and also to breathe life back into the property market.
Research from price comparison site, MoneySuperMarket found the average saving for home buyers was £5,034, under the original holiday. Until June 30, the maximum saving up for grabs was £15,000 (for buyers purchasing properties valued at £500,000).
While the original tax break is now coming to an end, the hope is that by implementing a “phased approach” to returning to the pre-pandemic stamp duty thresholds, this will offer the housing market a softer landing.
Read more: UK mortgage approvals rise by record 827% as stamp duty holiday deadline looms
Rates of stamp duty between now and September 30
· On a property costing up to £250,000 – 0% (this figure rises to £300,000 for a first time buyer – see below)
· Between £250,001 and £925,000 – 5%
· Between £925,001 and £1,500,000 – 10%
· More than £1,500,000 – 12%
(Rates are different in Scotland and Wales)
So how much can I save now?
While you can no longer make big savings, you may still be able to benefit from smaller tax breaks if you buy in the next few months.
· If, say, the purchase price of your dream home is £300,000 and you get your skates on, and manage to complete before September 30, the stamp duty payment will be £2,500, rather than £5,000
· Buy at £325,000 and you’ll pay £3,750, as opposed to £6,250
· Buy at £400,000 and you’ll pay £7,500, rather than £10,000
· Buy at £500,000 and you’ll pay £12,500, as opposed to £15,000
In each case this is still a significant saving of £2,500.
Lewis Shaw of mortgage broker Shaw Financial Services, said: “Many people believe the stamp duty holiday is dead and buried, but in reality, it continues for another three months and there are still savings to be had – albeit at a lower level. A couple of thousand pounds in savings can buy a lot of Ikea furniture, or take off some of the financial pressure.”
Watch: What do stamp duty cuts mean for buyers and house prices?
This is a view shared by Jo Thornhill from MoneySuperMarket.
She said: “Don’t worry if you missed the June deadline, a reduced version of the scheme is running through to September. Substantial savings can still be made, giving you the flexibility to spend money on other items, such as solicitors fees, general moving bills or even new furnishings.”
Thresholds for first time buyers
It’s worth noting that since July 1, stamp duty rates for first time buyers have reverted back to those which were in place before the pandemic.
This means there is no tax to pay for the first £300,000 of a main residential property. This £300,000 threshold will not only apply up until October 1, but also beyond that date.
First time buyers must then pay 5% on the portion from £300,001 to £500,000.
If the home a first timer is purchasing costs more than £500,000, the £300,000 threshold will not apply, and they’ll pay the normal rate of stamp duty.
Rates of stamp duty from October 1
From this time, the pre-pandemic stamp duty thresholds will kick in once again
· On a property costing up to £125,000 – 0%
(this figure rises to £300,000 for a first time buyer)
· Between £125,001 and £250,000 – 2%
· Between £250,001 and £925,000 – 5%
· Between £925,001 and £1,500,000 – 10%
· More than £1,500,000 – 12%
(Rates are different in Scotland and Wales)
Tips to help you survive the stamp duty holiday frenzy
Many buyers are expected to try and rush their transactions through before the start of October.
In fact, new findings from MoneySuperMarket reveal a third of buyers are still looking to take advantage of the reduced stamp duty rate that runs until the autumn.
· Don’t rush into a purchase just to try and beat the new deadline. A house is a huge purchase. Make sure you’ve made the right decision
Read more: UK house prices fall for the first time since January as stamp duty holiday ends
· Choose your conveyancing solicitor carefully, as many have a backlog of work
· Don’t ignore survey results because you’re in a rush. You could find yourself with costly bills further down the line
· Budget carefully and find the right mortgage for your needs
· Keep the lines of communication open between you, your lawyer, and your lender or broker. Ensure you’re all working together
· To work out how much stamp duty you’ll need to pay, make use of the Government calculator here.
What if I can’t afford the higher rate of stamp duty?
If you didn’t manage to meet the June 30 deadline to take advantage of the full stamp duty concession, and don’t have the money available to pay the higher tax, you do still have options – though things may be a little trickier.
Mark Harris of mortgage broker, SPF Private Clients, said: “You could try renegotiating the purchase price – though you need to be prepared for the vendor not to play ball. If you can’t get the vendor to compromise and split the ‘difference,’ you will need to consider how badly you want the property. With a shortage of stock in some price brackets and areas, you need to accept you may not find another suitable property any time soon.”
Read more: UK mortgage approvals rise by record 827%
If you do manage to negotiate a new price, you will need to inform the mortgage lender, as new documentation will need to be issued. Be warned that this could add time and cost to the transaction.
Harris adds: “If the chain has collapsed, it may be worth investigating whether you can use short-term finance, such as bridging, to enable the purchase to continue.”
But tread carefully with this kind of finance, and make sure you understand exactly what you are getting into.
Equally, there’s no escaping the fact that for some of those on tight budgets, there may be little choice but to pull out of the purchase altogether.
Watch: How much money do I need to buy a house?
