With the UK once again in lockdown, there are calls for an extension to the Stamp Duty Tax holiday beyond the existing 31st March deadline. Jeni Browne explains whether this is a waiting game worth playing.
While the latest national lockdown has not shut the property market as we saw back in March 2020, it is likely to cause further delays to mortgage application processes. As we've recently reported, the main sticking point is getting properties valued by surveyors. Unable to complete as many inspections as "normal" due to hygiene and PPE requirements, it's also possible many households will want to postpone these inspections rather than having people enter their property.
Consequently, many are calling for the stamp duty holiday deadline to be extended, to give those with live mortgage applications a better chance of completing in time. However, when there's no concrete indication that the Government will do this, is it worth the gamble?
The stamp duty holiday offers a tremendous financial incentive to buy to let landlords and home-movers alike; a tax saving of up to £15,000. It's made the process less expensive for those moving home, or, even better, allowed them to purchase a larger, more expensive property than they could have before.
For buy to let investors, the substantial tax saving has not only allowed you to purchase new property, or indeed your first investment property but also move personally-owned investment property into limited companies. While it's often the tax implications that motivate investors to move to limited company structures, it's often the initial stamp duty cost implication that prevents you from doing so! Even with the 3% surcharge for limited companies in England, you'll still benefit from up to a £15,000 tax saving. Opportunities like that don't come around very often!
We know many property investors have been on the fence about whether to take advantage of the stamp duty holiday, especially amidst rising property prices, which is understandable. I'm sure many of you are waiting until the wire to snap up properties reducing asking prices in a bid to meet the deadline; a dangerous game but potentially profitable. And with talk of a deadline extension, you may be tempted by hold off a little longer. However, I would warn against this, and here's why.
Firstly, it's still very much talk. We've had no substantial evidence from the Government that this will happen. Therefore, it's a potentially very costly gamble to take at this point. With many buy to let lenders now unable to meet the deadline for new applications, let alone delays with solicitors and local authorities, your options are running out to guarantee completion before 31st March.
Secondly, even if there is an extension, it won't necessarily be for everyone. It could potentially only apply to those who have applications already in process, in a bid alleviate some of the pressure on lenders, solicitors, surveyors, and local authorities to get everything completed in time. Alternatively, the deadline criteria could change from 'completed' to 'exchanged', which again would mainly benefit lenders and solicitors in terms of workload, but would still leave it pretty tight for new applications at this point.
Lastly, how long would the extension be? If it was three months, then that could certainly work for new mortgage applications. On the other hand, a month extension is, again, only going to help those already in the process.
Ultimately, the risk here is that missing the deadline, whether it's extended or not, means a substantial tax bill you weren't expecting. There is no fallback, and you will have to pay it. For those in a more privileged financial position, this might be irritating but not catastrophic. However, if you would otherwise be unable to afford the purchase you're making, that's not a good position to find yourself in!
The take-away from this is that until we know for sure whether the deadline will change, it's a better bet to assume that the 31st March 2021 is set in stone and the goal to meet. With that in mind, if you're yet to get a buy to let mortgage application in, time really is running out.
We have access to the up-to-date lender service times and, therefore, place your buy to let mortgage application with a lender most likely meet the deadline.
Even if the stamp duty holiday isn't a concern for you, but you'd like a speedy completion anyway, we can help! Call our expert team on 0345 345 6788 or email email@example.com today and get your investment plans underway.
STAMP DUTY HOLIDAY DEADLINE
For all our customers seeking to complete property purchases prior to the expiry of the Stamp Duty Land Tax holiday on 31st March 2021, whilst we will do our utmost to enable completion to occur on or before this deadline, we are unable to guarantee this will be achieved. Mortgages for Business do not control processing timescales for lenders, valuers and solicitors. Accordingly, we do not accept any liability to you in the event that completion is not achieved prior to the expiry of the Stamp Duty Land Tax holiday.