Property booms as home and overseas buyers rush to beat deadline
Property buyers are fighting off the pandemic to catch a new home before stamp duty goes back to its normal rate. For overseas buyers the race is even more important, as the rate will carry an additional surcharge for them from April.
As part of the range of measures to provide economic support through the Covid-19 pandemic, the Government introduced a temporary holiday for stamp duty land tax (SDLT) on the first £500,000 of purchases, but this will come to an end on 31 March 2021, when it will revert to the standard rates.
And a new rate will be introduced from that time for any purchasers based overseas, who will have to pay an extra 2% on top for any purchases. Until now, residence has not been a factor in calculating SDLT , but this new surcharge for non-UK resident buyers of residential property has been introduced as part of moves by Government to manage the pressure on house prices brought about by foreign investors.
Stamp Duty Land Tax (SDLT) is payable in England on residential property transactions where the market value is more than £125,000, with a tiered scale related to the purchase price, and with different rules if you’re a first time buyer, or buying an additional home or a buy-to-let, or through a company.
The standard rules provide a complete exemption from stamp duty for qualifying first-time buyers where the full market value of the property they are buying is £300,000 or less, and a reduced bill when the full market value is between £300,001 and £500,000.
There is also the chance to benefit when a property is being purchased under an approved shared ownership scheme, as buyers can choose whether they pay SDLT on the full market value or just on the value of the share they have purchased.
The current holiday on residential transactions means savings of up to £15,000 on each property costing £500,000 or more, which has helped move the property market into full swing following the end of the summer lockdown according to reported figures. The full saving is also available for those buying property in addition to their primary residence, whether for holiday use or buy to let, although they continue to pay the standard 3% surcharge applied for second and subsequent property purchases.
Any buyer who completes on a purchase before April 2021 is going to benefit, whether they are buying their main home, a second or buy to let property, or from overseas, and it means the next six months will be crucial not just for home buyers in the UK, but for overseas investors and expats looking to buy UK residential property.
For those considering a property purchase, the 31st March cut-off date for completions means the closer we get to that date the more likely we are to see log-jams in the conveyancing process, whether for land searches with local authorities, or mortgage applications with lenders, as everyone rushes to complete and services struggle to keep up with demand, so it’s worth getting some advice early on to see how much can be put in place while you do your property search.
Note: This is not legal advice; it is intended to provide information of general interest about current legal issues.
If you require further advice regarding this, or any other legal issue, please contact Chattertons