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Missed the stamp duty holiday deadline? We explain what to do if your chain breaks

After more than a year of driving property prices to new highs in the wake of the coronavirus pandemic, the stamp duty holiday will start to taper down at midnight tomorrow. 

The tax break, which has saved buyers up to £15,000 on their house purchases, will now be cut back with the maximum saving capped at £2,500. 

This is because the nil-rate band – the portion of a property purchase buyers don’t need to pay stamp duty on – will drop from the first £500,000 to the first £250,000. 

Home buyers have until midnight on 30 June to complete their purchases and benefit from the maximum amount of stamp duty relief 

It will stay this way until 30 September, when the nil-rate will be returned to its pre-pandemic level, £125,000.  

House prices have risen to record levels, with a typical property increased by 13 per cent or £29,000 over the course of the stamp duty holiday according to Nationwide Building Society – far outstripping the benefits of the tax cut. 

Many buyers have raced to meet the deadline, and data from Andrews Property Group shows that 50 per cent of properties marketed since March have gone under offer within a month.

But delays with conveyancing and surveys caused by heightened demand mean that many will not complete in time. 

Some will even consider pulling of their transactions if they have not budgeted to pay the tax.  

However, it does not always need to spell the end of the road. This is Money asked property experts about different ways property buyers could keep going with their purchases and keep their chains from falling apart. 

‘As a buyer I would have expected your agent to make it clear from the offset that your offer should not be reliant upon the stamp duty discount,’ says Jack Reid, founder of estate agent Orlando Reid. 

‘If you’re out of time and you can’t afford to buy without the stamp duty holiday, there are a few options that could help.’

1. Renegotiate your house price with your seller

If you don’t have the funds to buy your new home and pay stamp duty, you might consider asking the person you are buying from whether they would lower the price.  

This could be risky, as it might lead them to question your commitment to buying the home. 

However, if they are particularly keen to keep things on track – for example, they have another home ready and waiting, or want to get their children started at a new school in September – they may be willing to accept your new offer. 

‘This is the most unlikely option to be agreed, although if you have a very motivated seller, it just might be acceptable,’ says Reid. 

We explain the do’s and don’ts of negotiating on a property price here. 

If you have some funds to play with, one option might be asking them to go halves – for example if you had a £10,000 stamp duty bill, they would take £5,000 off the price and you would foot the other £5,000 yourself. 

However, their willingness to do this may depend on whether they have a stamp duty bill to pay themselves. 

If you manage to negotiate a new price, you will need to ask your mortgage lender for new documentation which may incur extra fees. 

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘If you do manage to negotiate a new price, the mortgage lender will need to be advised and new documentation issued. 

‘This could add time and cost to the transaction.’ 

Some buyers have managed to make it over the finishing line - but others will be left with a bill up to £15,000 more than they would have before 30 June.

Some buyers have managed to make it over the finishing line – but others will be left with a bill up to £15,000 more than they would have before 30 June. 

2. Negotiate with the whole chain

There is a way to get around the problem of having to ask for a discount from someone who isn’t getting one themselves on their onward purchase. 

However, it will require some expert negotiating from your estate agent. 

‘It entails asking every member of the chain to offer a discount that equates to the discount that would be offered by the stamp duty holiday’,  explains Reid.

‘I have used this option many times during the progression of a sale. It is the more likely to be accepted [than negotiating with your seller alone], as all parties offer a more affordable discount.’

‘To do this you will need to speak to your agent and suggest that he or she contacts all agents in the chain to propose a deduction.’

If there is another buyer in a similar situation to you down the chain, it could improve your chances of success.  

3. Move out and rent to keep the chain together  

A common method of holding together a broken chain is for buyers whose sellers have pulled out to sell their own homes anyway and move in to rented accommodation. 

‘Should chains break as a result of negotiations, the most common way of resolving this is by asking the seller whose buyer withdrew, to move into rented accommodation,’ Reid says. 

By most accounts, the stamp duty holiday has increased house values – so renting for a few months might mean a chance to get a better deal on the eventual purchase if prices fall. 

But it’s a gamble, as there is no guarantee of where the market is moving next. 

‘Now would be the perfect time to do this, with the possibility of prices lowering after the stamp duty holiday,’ says Reid. 

‘The amount of money spent on rent for six months to a year could be less than [the extra expense of] buying in the increasing market we have seen throughout most of the UK.’

Another option, though one to be wary of,  is to use bridging finance – a short-term, high-interest loan which you can use to buy the home and then pay back when your own property is sold. 

Harris adds: ‘If the chain has collapsed, it may be worth investigating whether you can use short-term finance such as bridging to enable the purchase to continue.’ 

First-time buyers can still save  

First-time buyers buying a home for £500,000 or less don’t need to pay stamp duty on the portion under £300,000, thanks to an existing discount that pre-dates the stamp duty holiday.  

Anything above that will be charged at the standard rates for all properties, which are as follows: 

  • 2 per cent of the value of the home on the portion between £125,001 and £250,000 (only applicable from 30 September)
  • 5 per cent on the portion between £250,001 and £925,000
  • 10 per cent on the portion between £925,001 and £1.5million
  • 12 per cent on anything above that

Cormac Henderson, chief executive of national home buying service Spring, says: ‘It is important that first-time buyers are informed. 

‘They have relief up to £300,000 anyway. So they shouldn’t be rushed to beat the holiday and would be best to wait until the wider stamp duty holiday ends.’

4. Make sure you complete by the September deadline

If you are upset that you haven’t met the first stamp duty deadline, completing in time for the September cut-off could be the next best thing. 

Simon Nosworthy, head of residential conveyancing at London law firm Osbornes Law says: ‘There is a perception that the stamp duty holiday will be over on 30 June, but that isn’t the case.

‘There are still reasonable savings to be made until the end of September, but buyers will need to act quickly. 

‘I would say that if a buyer starts the process in the next five weeks or so they should be confident of completing before the September deadline.’ 

5. Hold out and hope that house prices fall

Given that house prices have risen more than £20,000 in the past year, some argue that the stamp duty saving – at a maximum of £15,000 – is a false economy. 

If you have had a purchase fall through, biding your time might actually save you money in the event that house prices fall.  

This is especially true for first-time buyers and landlords, who aren’t relying on money made from the sale of another property to fund their purchase.  

There are already signs that asking prices aren’t increasing as quickly as they were earlier in the year, and the most recent government data showed that the average home knocked £5,000 off its value in April, reflecting offers made when buyers thought they had missed the original stamp duty deadline in March.

Another reason why property prices have risen is the lack of homes on the market – which has driven up competition for those that are. 

That could also be set to change.  

Will Rhind, head of mortgage advice at Habito says: ‘For sellers who had been cautious to list their home for health reasons or lack of job security, being double jabbed; restrictions fully easing from next month; and the economy bouncing back may all provide the confidence needed to move.’ 

6. Don’t get too caught up in the hype 

While it is frustrating to have to pay several thousand pounds more for your new home, Rhind urges those that have the funds to proceed to think about their home as a place they will live in and enjoy for many years, rather than as a purely financial asset. 

‘Most people don’t buy homes as a financial investment,’ he says. 

‘Unless you’re a buy-to-let investor, people buy homes as a place to live, raise families, be part of a community, enjoy life, grow old. 

‘The best advice is to think long-term and buy a home that’s right for your needs, at a price that you can afford and that you plan to enjoy for several years.’

It is also worth bearing in mind that, if you pull out of a transaction, there is no guarantee you will find something else quickly. 

‘You will need to consider how badly you want the property,’ says Harris. 

‘With a shortage of stock in some price brackets and areas, you may not find another suitable property anytime soon. 

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