Home buyers are scrambling to complete purchases by the end of the month as a they face thousands in extra costs due to the looming stamp duty deadline.
A report from Rightmove has said that 74,000 movers in England are likely to just miss the deadline and instead complete in April. There is a collective £142 million in extra stamp duty payments on the line for them.
Currently, first-time buyers pay no stamp duty when purchasing a home worth up to £425,000 thanks to ‘stamp duty relief’. After this they will pay five per cent on the remaining amount, up to £625,000.
From April, the threshold will drop to £300,000, and the higher amount to £500,000. In both cases, purchasing a property worth more than the higher threshold will remove the relief, and mean standard rates need to be paid.
There are around 25,000 first-time buyers that are currently in the process of legally completing on a property but predicted to miss the April deadline.
For anyone buying a second property, the threshold will halve to £125,000 from April. These changes were announced by chancellor Rachel Reeves at Labour’s Autumn Budget.
This means that from April, a first-time buyer purchasing a home worth between £500,001 and £625,000 will see a bill of £11,250, according to Rightmove.
Figures from Rightmove show that the average property price was up 0.5 per cent in February, to £367,994. This is below the longer-term average of 0.8 per cent, a “proactive measure” says Rightmove’s property market expert Colleen Babcock, as sellers factor in the looming increase in stamp duty.
Can buyers still beat the deadline?
Because buying a house is not a fast process – usually between 12 weeks and eight months – anyone that is not currently in the final stages of purchasing their property is unlikely to be able to beat the stamp duty deadline now.
The legal completion stage comes after the exchange of contracts, and usually takes two to five weeks. This means anyone not at least at this point is cutting it very close.
Solicitors and lenders are likely to be doing everything they can to help sellers who can realistically meet the deadline. However, buying a home is often a two-way process, with the speed of certain steps depending on the sellers.
In light of this, property experts have called on the government to extend the deadline to allow at least those who had begun the home-buying process before the deadline to take advantage of the lower rate.
Ms Babcock said: “We expect a rush to complete close to 31 March as first-time buyers and home-movers try to avoid paying extra in tax. Our numbers show how there is a relatively small, but disproportionately impacted group of first-time buyers who will be caught out by the changing thresholds, highlighting some disparities in the way the current system works.
“With 74,000 people only just set to miss the deadline, in part because of the extremely lengthy completion times in England, we think it would make sense to grant a short extension to the deadline and help these movers, rather than have them face higher charges when they complete later in April.”
Last month, Labour unveiled its plans to streamline the house buying process, cutting back on wasted time and money. The Ministry of Housing, Communities and Local Government says the changes will improve digitisation and join up in the sector, saving around £400 million for both buyers and sellers.
Announcing the plans, housing minister Matthew Pennycook, said: “We are streamlining the cumbersome home buying process so that it is fit for the 21st century, helping homebuyers save money, gain time and reduce stress while also cutting the number of house sales that fall through.”
