What can buyers and sellers do to complete before the June Stamp Duty deadline?

When the extension to the Stamp Duty Land Tax (SDLT) holiday was announced last month, the property market heaved a sigh of relief. However, the three-month extension is not that generous. If delays continue, some transactions that have only recently commenced may still struggle to complete before the new deadline.

With less than three months to go before the revised Stamp Duty deadline ends on the 31st June 2021, buyers and sellers should be taking action to help ensure their transactions complete without avoidable delay.

How does the extended Stamp Duty holiday deadline work?

In July 2020, the Chancellor Rishi Sunak announced a Stamp Duty “holiday”. This Stamp Duty relief was announced to mitigate COVID-related economic anxiety that threatened to stall the UK property market, just as transaction volumes were picking up after years of Brexit uncertainty.

Under the scheme, buyers of property sold for £500,000 or less would pay zero Stamp Duty. In addition, no SDLT is due for the first £500,000 on properties sold over the threshold.

Prior to the extension, Stamp Duty rates were due to revert to the pre-holiday values on the 1st April. If you were buying a £500k property and completion was delayed until after the deadline, you would have had to pay an additional £15,000.

Fortunately for buyers, the increase after the new deadline will be staggered. If your transaction is delayed past the new deadline of 31st June, reduced Stamp Duty rates are in place until 30th September 2021. Rather than jumping from £0 to £15,000, the Stamp Duty on a £500,000 property between 31st June and 30th September would be £12,500.

From 1st October 2021 onwards, SDLT rates will revert to the historic, pre-holiday values.

Why are there conveyancing backlogs at the moment?

Delays have the potential to occur throughout the conveyancing process.

Furloughed staff and COVID-secure workplaces were a significant cause of delay from early in the pandemic. Although the situation has improved, historically high transaction volumes since the end of the first lockdown last Summer has meant demand for conveyancing-related services has outstripped capacity for many months.

• Mortgages - Banks and other lenders were reporting weeks of delays with mortgage processing due to COVID disruption and staff shortages. Although most lenders have since improved service, some are still experiencing issues.
• Property searches - Some local authorities were reporting long delays with the supply of searches even before the pandemic.
• Conveyancing - Although homeworking was not uncommon practice for conveyancing solicitors before COVID, many office and support staff were furloughed early on. Many firms lacked the technology and experience to quickly transition to working completely from home.
• Leasehold managing agents packs - Even in normal times, weeks of delays with the supply of managing agents information were common. COVID disruption and high transactions have exacerbated this issue even further.

What can I do to speed up the conveyancing process?

There are several steps both buyers and sellers can take to speed up their conveyancing, to give their transaction the best chance of completing before the new deadline.

Advice for buyers

• Instruct your solicitor as soon as possible.
• Apply for mortgage pre-approval, and complete all documents as soon as you can.
• Complete all the ID verification steps immediately.
• Ask your solicitor to apply for searches as soon as possible. This does mean paying for the searches sooner, but this will easily be offset by the reduced risk of a delayed completion. If you are a cash buyer, or your lender will accept an indemnity policy in place of local authority searches, you could discuss this route with your solicitor rather than waiting (potentially months) for searches to be delivered.
• Book a property survey ASAP.
• Chase for confirmation of receipt for any forms, documents, questions or answers you send. You could lose a week by assuming an important email was received by your solicitor, only to find it was mis-sent or an attachment was missing when you eventually chase.

Advice for sellers

• Instruct your solicitor as soon as possible, ideally before you find a buyer.
• Complete all the paperwork, including ID documents and TA property forms, immediately - You don’t even need to wait until you have found a buyer.
• If you are selling a leasehold property, ask your solicitor to apply for leasehold management information as soon as possible.
• Locate missing documents like electrical completion certificates and building warranties.
• As with the advice for buyers above, chase your solicitor for confirmation that they have received important forms and paperwork.

Will the Stamp Duty holiday be extended again?

The Stamp Duty holiday was originally due to end on the 31st March 2021. The Chancellor only announced an extension to the deadline in early March, after weeks of uncertainty.

Chris Salmon, Director of Quittance.co.uk said, “There was anxiety among property professionals that the end of the scheme could negatively affect the property market, and conveyancing solicitors were concerned that many in-progress transactions would not complete before the deadline. The extension allowed buyers, sellers and property professionals breathing room to avoid a crunch at the end of March.”

“Although the economic effects of COVID-19 are likely to be felt for years to come, the success of the vaccine rollout in the UK has meant commentators are increasingly optimistic. Increased confidence and a return to “normal” by the end of Summer could offset the impact of the end of the scheme.”

At this stage, it seems unlikely that the deadline will be extended beyond June, although the lower rates between July and September will provide some relief for buyers who are less confident their purchase will complete before 31st June.

Plan ahead

‘Normal’ Stamp Duty rates will only apply from the 1st October 2021 onwards. Although rates will be reduced between 1 July 2021 and 30th September, there will still be some duty to pay on properties sold for between £250,000 and £500,000.

If you are buying a property close to the £500,000 threshold for zero Stamp Duty, and it looks like your property may not complete before the end of June, you should take precautionary steps to ensure you can cover the additional Stamp Duty cost.

If your budget is very tight, and there is a risk your purchase could fall through if the deadline is missed, you should plan ahead now. Before things get too tight and stressful, you could discuss splitting any Stamp Duty with your seller. This is likely to be a better option for all sides than the sale collapsing.

By exploring your options now, with well over two months remaining before the Stamp Duty holiday ends, you’ll give your sale or purchase the best chance of completing even if the deadline is missed.

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This article has been provided by Chris Salmon is a co-founder and Director of Quittance Legal Services.