What would you do? New Stamp Duty Rules

[Sammyjoegreen]

Hello All,

Thank you in advance for reading and any responses.
So I am sure we all have heard about the impact of the new national budget on stamp duty. I am in the process of purchasing a house for myself and my toddler which I was hoping to make our forever home. However, following yesterday's budget we're now facing almost 40K in stamp duty charges as I am not a first time buyer.
Could we still afford it? Yes but it means we won't be able to tackle any refurbishment work the house requires for a while and these are essential as I have a small child.
I am considering the following options:
Option 1. asking the seller if they might consider deducting the additional stamp duty from the purchase price or at least a portion of it. I feel bad about doing this as they have already had a previous transaction on the same house which was near completion fall through for financial reasons on the side of the buyer. They are selling as they need to downside following partner's passing
Option 2. Look for a cheaper property but I've already paid for a survey and part of the legal fees for this one. Also, there really isn't anything that is considerably cheaper in the area that would make any significant difference. Average price is about 550K. I'd have to look at moving to a completely different area far away from family.
Option 3. Continue the current transaction and save till I can afford the refurbishment work.

Help please! What would you do or are there any other options you could suggest?
Thank you.

@Another2Cats sadly no- was due to exchange end of next week- annoying thing is he didn't even look to buy till 9 weeks into the sale and is now 3 weeks in on a purchase. Ideal place too as empty and no chain-

He has however spent £70k less than he was expecting to spend so he might I think be tempted to knock £12k off to keep the sale simply because he can't be arsed to keep going through this process at 85- I guess we will see-

This. Why on earth do you think it woukd be OK to ask this?

Obviously changes in stamp duty are going to affect house prices going forward . Stamp duty in general is going up next Spring for most properties, so any new buyer is going to take the changes into account. I would definitely think it's worth talking to the estate agent to see if there's any compromise possible.

Poor guy. I assume you mean 10 days before exchange rather than completion?
That's a particularly annoying, especially as you can get the SDLT refunded if you sell within 3 years. Perhaps he could agree a small reduction to keep the sale from falling through and then have something drawn up for them to refund him/ his estate down the line when they sell. Possibly a silly suggestion, I'm not a lawyer!
It probably would have been fairer to delay the start a bit. I guess the disadvantages would be that it becomes a nightmare for the professionals involved when there is a cut off and that it's become a cliff edge with transactions increasing just before the cut off and the suddenly falling right off with a sudden drop in prices. I imagine this will happen at the end of March/ start of April.

We are in the same situation. Due to exchange this week, now our buyers have an extra £9k to pay in stamp duty and say they need to sell their 1st flat before proceeding. Don’t think our upward chain will wait. We will lost the house where we imagined raising our family, plus several months of savings between legal fees (for both the sale and purchase); surveys; searches; mortgage application etc. Understand all the rationale between targeting investors, landlords with multi properties etc but wonder how many people like us will be affected with this measure. Those with money to spare will continue to buy extra properties if they think they will profit from it!

I have been absolutely fuming with prospect of my hard earned savings go to waste.

@PrettyFox thing is I actually personally agree with the principle but don't agree with it being inflicted on transactions that have already started- because people have budgets etc already set and agreed. I am not sure of his buyers situation but think they intended to rent out their old one for 18 months, live in my FILs whilst doing it up( it's not bad at all just a bit dated and I know they planned to extend) - think it was done partly to make the chain aspect easier!! To be honest I want my FIL to cough up as he needs to move and has got his ongoing place £70k cheaper than he was expecting to pay. I suspect the buyers knew they would be hammered for second home tax but expected it to start maybe January etc- by which time it wouldn't have been an issue- an immediate kick in is crap !

It would be rude and cheeky to ask a downsizing widow to pay the tax for you so that you can buy a second property. Your mum and sister have far more obligation to help you out with renovations or a tax bill than your vendor does. Why can’t they help?

Op I’m not going to lie, bit shocked at this, you really didn’t wish to admit this was because you are buying a second home. Even though it was very clear it was not just because you were a first time buyer, if I was your seller and you asked me to pay your stamp duty I’d also pull out.

Agree, it’s very distasteful.

Very similar situation to ours, I don’t think our buyers intended to keep the two properties long term, they just wanted to kick off the process and move soon and their budget allowed them to do that.

Im not against it in principle too but totally agree with you that ongoing transactions should have been more protected, as people budget and plan for it and many more people will be affected with chains collapsing - I don’t own two properties, don’t intend to, and will face significant financial lost.

OP, the additional tax is designed to encourage people not to have more than one house at the same time, not to penalise second time buyers.
If you've only just had an offer accepted I'd ask for the reduction but don't be too surprised when they pull out.

I'm in exactly the same situation. I have been waiting to exchange and have been ready to exchange for 6 weeks. Due to delays on the sellers side and their onward purchase, I now have to find another £10k. I have spoken to the Estate Agent, and they are in the process of speaking to the sellers to see if they are willing to reduce the price. If not, I will ask if we can split 3 ways and each party takes a hit of £3.3k. They have unnecessarily delayed the process and we had planned to complete in October, so I think it's pretty unfair that I take the full brunt of this.

I am sorry you and the other posters are in this situation however I completely disagree that you should not pay in full.

For well over a year labour have said they will target second home owners with tax increases so you have had plenty of notice and you should have budgeted for any potential increase and not expect others to pay for your lack of financial planning. Especially as you have the option to sell your main property within 3 years and claim the £10,000 stamp duty back! The others in the chain don’t have this option. Plus you will end up with 2 properties. Why on earth you think they should pay for the luxury of you owning a second property is beyond me!

Second home owners are savvy buyers as this is why you own a second home in the first place, you are a not a naive first time buyer. Delays in property purchases happen all the time and are to be expected in this current climate, so you must have known this was likely going to happen. You should have budgeted for this and now your lack of planning is going to affect the whole chain. Harsh but true.

Thanks for your response however I do disagree with you.

You are making many assumptions herel! I have come out of a lengthy divorce and have been living in a rental for the last couple of years whilst waiting for my divorce to finalise. There was no option to move to my rental property as it is miles away and did not want to disrupt my kids by moving schools etc. Just because I have a second property it doesn't mean I have additional funds at my finger tips, and selling it is not an option as there is hardly any equity in it! I am a single mum and rely on the funds to cover my outgoing every month. Seems like you have a bit of a bee in your bonnet about those who have second properties, but its not all a bed of roses!

The sellers and the onward buyers are the ones that are unnecessarily delaying matters, so this doesn't count? And yes I know delays in property purchases happen but does not mean I had a spare £10k lying around just in case Labour decided to up the taxes overnight!

No assumptions and I have a second property so no bees in my bonnet!
if you own a rental property you must have known what has been going on in the news surely. You should have maybe purchased a lower price property to cover any eventualities so you can keep your rental property.

I am also in the process of purchasing a home but I prepared myself for the possibility that I may get stung when it was becoming clear that labour would be the next government and Labour definitely have a bee in their bonnet with regards second home owners so it came as no surprise! I’m not happy it’s going to cost me but it’s my problem no one else’s!

I certainly would not expect others in my chain to pay the excess for me though.

You say you do not have additional funds at your finger tips, what makes you think the others in the chain do?

I would feel sorry for those buying their main residence if labour increased stamp duty overnight for those buyers but again, if they run out of time in spring when the increase takes effect then they also knew this was coming. We all knew and should have really expected the worse to happen.

And if you do sell your main home within 3 years are you going to give the chain back the money you reclaim from the increased stamp duty you all paid?

I still disagree with you as you knew this possibility was coming and you shouldn’t expect the others in the chain to pay for you. Sorry

Is there any chance that the 9K could be absorbed by the buyers and the others in the chain and legal agreements drawn up for them to pay you all 2 or 3k or whatever when they sell the flat? I'm not a lawyer but, if something could be arranged, it might prevent your chain from collapsing and you all losing a similar amount of money anyway.

Life is rarely so black and white. Not all second home sellers are super wealthy and visa versa. It's perfectly reasonable for you to ask for the additional tax costs to be split throughout the chain, particularly if the sellers have introduced unnecessary delays. Lots of possible taxes rises, including those on second home owners/ buyers, were leaked to the press. Many of them have not come to fruition. There were no details on the timing and this particular tax increase has been introduced in a hurry so wasn't possible to anticipate. It's inevitable that there are renegotiations happening and there will be again at the start of April 25 and likely a fall off in deals, especially for FTB, after that cut off.

I really try not to jump on the bandwagon of "all second home owners are greedy and entitled", but the attitude of this thread is fast changing my mind. It's just unbelievable that there are now three here who actually expect other people to fund THEIR tax bill.

@Susanap I think you would be suprised how many people are incredibly non political and simply don't follow business/ political policy and so something like this catches them out- you would think those planning on spending just over half a million in my FILs case would be up to date with the likely situation - it may be that they were but either didn't consider it would be a 2nd property as they will be living in it as main home or as I said previously they thought it would kick in within a few months- not immediately

We are definitely exploring all the options available because there is alot of money to be lost if the chain collapses at this stage! It’s also a shame because it has been a very straightforward process - we are just 9 weeks in the process and ready to exchange, 3 houses, so people have been collaborative. I thought about suggesting them to offer a lower deposit if they can make that work with their lender (they would need to increase slightly the mortgage). We don’t need their full deposit to pay for ours so perhaps that could give them the money they need now to cover the tax. Wish us luck 🍀

It baffles me! Unless you were living under a rock everyone knew changes were coming in and that is the reason the market has stalled in the last few months.

If people ignored the news and were prepared to take the risk and buy with their eyes closed then they should NOT expect others in the chain to pay for their tax hike!

The only people who would agree with such a thing are either unscrupulous second home owners or those with a vested interest in the property market praying for a house crash and jumping on every post on here to brainwash sellers into dropping their house prices or taking hits so they can grab a bargain themselves!

I do not believe for one second that someone who is savvy enough to purchase a second home went ahead and commenced a house purchase without wondering if there may be a tax hike as soon as labour got in….Or maybe they did knowing full well that if it was going to cost them more money they would then put the rest of the chain between a rock and a hard place: ‘either you all chip in to fund my second home or I will pull out and you will all pay anyway with the chain collapsing’!

Come on….
Yes of course they can ask the chain to all chip in, some may fall for it, savvy ones won’t, but what happens when the second home purchaser decides to sell their main property within 3 years and then claims the full stamp duty back for themselves, how many of them are going to reimburse the chain?

And are they going to give the chain a slice of the profit they stand to make from their second property from rental income or profit upon the sale? I doubt it very much..

Cry me a river…

I wish you luck and hope you can come to some sort of agreement or compromise so that you can all proceed as planned.

@Susanap life isn't as black and white as you seem to think. In real life, people don't want their chain to break apart if they are near exchange and have invested time and money. You could say that reaching an agreement was savvy, especially as the market isn't likely to pick up immediately, unless perhaps for FTB homes in the next few months, then probably slowing significantly following April 25 the SDLT rise. Yes, it's very annoying for sellers and for others involved too but these things happen and this one has been introduced overnight and has caught many unawares.

@susanap well said, there is definitely considerable posting here that is part of a one-person campaign to try and talk the housing market down!

But TBH, I don't really see what difference it makes whether 2nd home owners saw it coming or not, it's still 100% their issue. As you say, they have many options to try and soften the blow for themselves while also being extremely unlikely to be particularly cash-strapped or vulnerable, unlikely to be stretching the LTV until it squeaks.I personally wouldn't believe any of them if they claimed they genuinely couldn't find the extra money for the stamp duty. Not wanting to is very different to not being able to.