How will Covid-19 affect your SDLT position?
Since March 2016, if you buy a new home without selling your current home, you are usually liable to pay a higher rate of SDLT via a 3% surcharge that could be reclaimed if the existing ‘main residence’ is sold within three years.
As a result of Covid-19, the Government imposed stringent lockdown measures effectively bringing the property market to a standstill. In many cases, this arguably made it impossible to finalise transactions.
As such, the three year deadline to sell your existing ‘main residence’ has now been extended for those who may have been affected, provided you can show you were prevented from selling your property due to exceptional circumstances outside of your control.
A potential SDLT holiday?
Whilst the impact on the property market can easily be seen in the short term, the longer term prospects still remain uncertain – both in property and for the wider UK economy. Nevertheless, boosting the housing market is expected to the help with revitalising the economy. It has been suggested that, in order to encourage this, the government should go one step further than just relaxing the higher rate rules and should announce an ‘SDLT holiday’.
This has also been supported by The Royal Institute of Chartered Surveyors (RICS), which has argued that an SDLT holiday would be a powerful tool to help restart and revive the market and that some government intervention is required.
First-time buyers – desperate to leave Mum and Dad?!
There is expected to be a surge in first-time buyers, with plenty of people ready to ‘fly the nest’ after a long lockdown cooped up with their parents.
Those who have been living with their parents during lockdown, and who may have already considered saving for their first homes, may now be further encouraged to take the plunge, particularly with the potential for more working at home. First-time buyers already benefit from SDLT relief up to £500,000 and, for anything above, an SDLT holiday would be an added incentive to get moving.
We already know that there is demand for new homes and this remains promising for house builders, so long as they can still attract these first-time buyers through government schemes such as Help to Buy.
Rural living and the desire for a second home
Throughout lockdown, people have certainly taken a look at their lives and working situations as a whole and have started considering long term decisions based on the pandemic.
It is expected that more people will be encouraged to work from home on a more permanent basis, with companies choosing not to re-open some offices and commuters unlikely to be keen to get back on busy trains. It will be interesting to see whether this starts a wave of moves to the countryside or, on the other hand, makes city life more attractive.
Either way, circumstances and therefore desires will change and we may well see an increase in demand for a rural second home as an option to provide a more harmonic living and working space. Of course, these second homes will attract the 3% SLDT surcharge unless there is a permanent relocation. A relaxation in the SDLT rules here could be taken advantage of and any regulatory changes to SDLT would need to be considered carefully.