First Time Buyer Stamp Duty Holiday Ends 24 March

Time is running out for property purchasers to take advantage of the first time buyer stamp duty relief. The temporary relief, which means that anyone who qualifies as a first time buyer and is paying between £125,001 and £250,000 for their property does not have to pay any stamp duty, was introduced in 2010 by the Labour Government in a bid to boost the flagging housing market by encouraging in more first time buyers.

It was always due to expire on 24 March 2012 and there is no indication that it will be extended. Indeed, it has had little more than a negligible effect on the market since it did nothing to address the lack of available mortgage finance. In fact, its biggest impact has been in the past month with those who have been considering buying for a while scrambling to get in before the deadline.

So Who Qualifies for Stamp Duty Relief?

To qualify for relief the buyer must be a “first time buyer”, defined as someone who has never owned a property or an interest in a property, legal or equitable, either at home or abroad. This means that those who have been entitled in the past to an interest in a property (for example those who have purchased a property with a partner but not been named on the legal title) are excluded as well as legal owners.

Those who have owned property or an interest in property abroad are also excluded, though quite how HMRC would check in the case of a person who has migrated to Britain from abroad it is difficult to see.

In the case of joint purchasers, all must be first time buyers to qualify. If you are paying more than £250,000 you won’t qualify either (those paying up to £125,000 don’t pay duty anyway).

What Do First Time Buyers Need to Do to Beat the Stamp Duty Deadline?

In order to qualify, a transaction has to actually complete by, effectively, 23 March (the 24th is a Saturday). It is not enough to have an offer accepted or even to exchange contracts. Completion means that the money has to be paid over to the seller’s solicitor and possession has to be given to the buyer. First time buyers would be wise to recognise that this will not always be achievable and should budget for the stamp duty.

The majority of first time buyers will be buying with a mortgage they will not be able to elect to dispense with the usual searches and enquiries to speed up a transaction (and this would be unwise anyway) however letting their solicitors know at the outset that they qualify for relief and signing any documents and paying any money on time will help. If there is a chain of transactions it would also be wise to let the estate agent know and ask him to cascade the information up the chain. When thinking about the completion date, first time buyers should remember that they do not have to move in on the day of completion and not being available to do so should not be a barrier to completion.

The Stamp Duty Deadline Doesn’t Just Affect First Time Buyers

Although a chain of transactions can obviously only have one first time buyer and this is the party who directly benefits from the relief, sellers, estate agents, solicitors and indeed other buyers in the chain ought to be aware that they could be indirectly affected if the deadline is missed too. This is because a buyer who has not budgeted for stamp duty may find himself unable to afford the transaction once duty is introduced. This could lead either to the collapse of the chain or to a request for a price reduction. The seller may attempt to pass this reduction on to his seller and so on. Although no one is obliged to reduce their price, it may be the only practical way to keep the transaction from failing.