Stamp duty is a major cost to budget for when buying a property or land in the UK. Right now, however, most people buying property do not have to pay this tax due to the stamp duty holiday. But when does this tax relief apply? Upon exchange of contracts or on completion?
Let’s find out.
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What is stamp duty?
It is a tax that you pay if you buy a house or land over a certain price in England or Northern Ireland. Scotland and Wales have their own versions and rates of stamp duty.
The exact amount of stamp duty charged depends on the value of the property and your personal circumstances.
The best way to find out the amount of stamp duty you’re due to pay is to use the stamp duty calculator on the gov.uk website.
What is the stamp duty holiday?
The stamp duty holiday means that if you’re buying a property with a value of up to £500,000 in England or Northern Ireland, you won’t have to pay stamp duty.
The holiday was introduced last year by the government to boost the property market which had been hit hard by lockdown.
The relief was due to end in March 2021. The government has since extended it until the end of June 2021 to allow more buyers to take advantage.
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When does the stamp duty holiday apply?
Before we answer this question, let’s distinguish between the two terms.
Exchange of contracts
This is the part of the home buying process where the seller and the buyer legally commit to the transaction and the sale becomes legally binding.
The exchange typically takes place by way of a telephone call between your solicitor or conveyancer and the seller’s.
Once contracts are exchanged, you’re legally bound to buy the property.
Failure to follow through with the transaction can result in legal and financial penalties. It is therefore crucial that you make sure you’re happy with every aspect of the purchase before you authorise the exchange of contracts.
Completion
Completion is when ownership passes from the seller to the buyer. It’s when you are free to move into your new house.
On completion day, your solicitor will make arrangements for the transfer of the money to the seller’s solicitor. You’ll get keys to your new house as soon as the money reaches their account.
So when is stamp duty paid?
Stamp duty is paid on completion. As long as completion occurs during the stamp duty holiday window, you won’t have to pay the tax.
You have 14 days after completion to file a tax return for stamp duty and pay whatever is due. Your solicitor or conveyancer should calculate and file this for you on the day of completion.
What does this mean for those buying property now?
The government has extended the stamp duty holiday until the end of June. What this means is that if you’re hoping to benefit from the stamp duty holiday, you need to have completed your purchase on or before 30 June.
If you exchange on or before 30 June but complete after this date, then you’ll have missed the deadline and will not benefit from the relief.
