George Osborne announced new rises in Stamp Duty Land Tax on second homes and buy to let properties during his Autumn Statement back in November and the rise is due to start on April 1st, but can you get through your buy to let purchase in just six weeks and avoid the extra thousands of pounds it will cost if you miss it?
The answer to whether you can beat the rise and complete on your buy to let property before the increase is not certain, but you can try your hardest to push it though and we will give you a few tips to hopefully help to speed things along for you.
What is the current position and how is it changing?
As long as you complete on your second property on or before the 31st March 2016 you will not pay any additional Stamp Duty Land Tax but after this time, the rate increases depending on the value of your property. From 1st April 2016, you will pay:
- On properties worth up to £125,000 – 3%
- For properties from £125,001 to £250,000 – 5%
- For properties from 250,001 to £925,000 – 8%
- For properties from £925,001 to £1.5m – 13%
- For properties over £1.5m – 15%
Therefore on the average property in the UK, which is worth about £188,000 the increase in stamp duty land tax will add on nearly £7,000 but if you completed one day earlier, on 31 March, you would only pay £1,200. Whist this is a large increase this will be magnified in the London property markets where costs are so much higher than the rest of the UK.
Average purchase prices for properties in London are just over £514,000. When purchasing a buy to let property in London at this price, the Stamp Duty bill would be approximately £15,000. However on the 1st April this will more than double, with Stamp Duty at more than £31,000.
This will have a huge impact on people who are considering buy-to let property and will impact the profitability of the buy to let market going forwards, so what can you do if you are looking to complete on a buy-to-let property before 31 March?
First and foremost you need to be explicit with your conveyancer about your completion date goal. No one will be in a position to guarantee completion by that date, but they can give you a better idea on the complexity of the purchase, including whether there are chains involved.
Having a chain on the property you are looking to buy will seriously harm your chances of completion as there are so many unknowns that could go wrong and delay your purchase. Therefore, when you are looking for a property to buy look for one where there is no chain.
Secondly, purchase of a freehold property will probably speed things up as there is less work for the conveyancer to do on a freehold property and they do not have to investigate lease lengths and details about the lease prior to completion.
In addition, if you target properties that are already empty you will almost always complete more quickly than those that are still occupied. This is merely a matter of logistics as it does take time for a family to find somewhere else to live and move out.
Where possible, completing with cash will also greatly speed up the purchase too, but this is much more unlikely. You can however, get yourself in the best possible position with a mortgage agreed in principal.
You know the amount you want to spend, so go to a mortgage provider and do all the leg work involved in getting a mortgage, such as providing income, detailing outgoings and expenditure and get yourself to a position where they will offer you the finance, subject to the property being acceptable to them and the survey coming back OK. This means that once you find a property, you are in a great position to move forward.
Lastly, by staying on top of the conveyancing process and making regular calls to everyone involved, such as the mortgage company, your conveyancer and even the estate agent if you want them to chase up the vendor. Don't make a nuisance of yourself, but regular and friendly calls will probably push things through more quickly.
Whilst we cannot guarantee that we can complete on your property prior to the 31 March, we will do all we can and remember, with Co-op Legal Services you get a No Sale No Fee Guarantee so if your sale falls through, you won't pay any legal fees incurred, only the fees (called disbursements) your solicitor has already paid, such as search fees. We also cover the whole of the UK, unlike many other conveyancing firms.
You may want to review our article called How Long Does Conveyancing Take? as this will give you a good understanding of the processes involved and provide you will some tips on how to speed up the process.