Stamp Duty Rise Looms

With the stamp duty on sales of homes valued at more than £1m rising to 5% from April many are rushing to complete their sales to save money.

The increase in stamp duty from 6 April will only affect sales of homes valued at over £1m. This increase will add significantly to the overall price to pay, particularly of course as you rise to the £2 million plus market.

Will the rise hit property sales?

Diane Ray, MoneyHighStreet.com commented ‘Probably not at this level. With a general shortage of good property at this price level, if someone finds a property they want to buy they will will be prepared to pay the additional tax to get it. It’s unlikely to be a deterring factor for this level of buyer’.

That said many of those that are in the process of a house sale are rushing to complete before the rise comes into force.

It’s being reported that some estate agents are advising their clients in this price bracket to exchange and complete before the deadline and then allow the current owners to rent back the property at a nominal rent.

As John Stephenson, senior partner and head of residential property team at city firm Bircham Dyson Bell comments though “In principle, this is simple to effect legally and is superficially very attractive, but it comes with a big warning because many mortgage offers require that vacant possession is given at the date of completion, which is when the buyer’s mortgage kicks in.

“Breach of the mortgage terms could result in the lender calling in the loan or (as a price for not doing so) insisting on converting it to a buy-to-let mortgage at a much higher interest rate.”

He advised: “For those with such plans, it’s wise to consult with the lender and get permission to rent back the property for a short period of time to avoid the risk of such serious penalties.”

Interestingly enough, it is being suggested that the Government may give homeowners stamp duty incentives in the Budget under their Green Deal. It’s not clear yet what these will be but expectations are rising that the Chancellor will make announcements around this as part of his fortchoming Budget.

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