SDLT Increase

SonnyH

Hi,
We are in the process of purchasing a second property. We viewed in June, had surveys etc done in July and agreed a price in late August. However, the legal side has dragged and we have not yet exchanged contracts or have a completion date, although we expect this to be within the next month.

The govt have just announced a tax increase of 2% on second homes from tmr.

My question is given we have a sale agreed in principle, but with no exchange of contracts will we be liable for the increase (and in our case adding an extra £7,000 to the purchase) when we sign/complete?
Thanks.

TheJP

Yes i would assume the increase will affect your purchase.

MeteredOut

Almost certainly yes - didn't see anything about any exemptions, and since you've not exchanged, I can't see how you can avoid it.

mebu60

Yes. SDLT is at completion. 

You could try renegotiating the purchase price.

mebu60

MeteredOut said:

Almost certainly yes - didn't see anything about any exemptions, and since you've not exchanged, I can't see how you can avoid it.

Unless you withdraw! 

Chemistry777

Yes applies to all transactions not completed before tomorrow.

SonnyH

Thanks for the responses. Withdrawing is a serious consideration now. We were already on the hook for £23k in SDLT (for a house costing £355k!!!). Taking it to over £30k is probably the tipping point. 

TheJP

mebu60 said:

Yes. SDLT is at completion. 

You could try renegotiating the purchase price.

I don't see why the seller should stump up the cash to pay for the tax the buyer has to pay. Its the buyers responsibility to pay this tax not the seller.

user1977

Chemistry777 said:

Yes applies to all transactions not completed before tomorrow.

Or exchanged (at least, there are invariably transitional arrangements where buyers are already committed to a purchase, but I haven't looked at any small print about today's announcements).

But being merely "in progress" is meaningless from a tax point of view.

EssexHebridean

As you haven't exchanged yet, yes, you are going to be liable for the increase.

There hasn't yet been any confirmation of transitional arrangements that we have seen, although the usual deal in this sort of situation is that the exchange date becomes critical when making an SDLT submission. We would expect that matters which have already exchanged will come under the old arrangements, and those exchanging from tomorrow onwards will be subject to the increased amount. 

mebu60

TheJP said:

mebu60 said:

Yes. SDLT is at completion. 

You could try renegotiating the purchase price.

I don't see why the seller should stump up the cash to pay for the tax the buyer has to pay. Its the buyers responsibility to pay this tax not the seller.

The buyer would factor in SDLT at the prevailing rate when making the original offer and agreeing a price. If that goes up prior to exchange the buyer has the option of swallowing the increase or renegotiating the price. The seller does not have to accept the latter but then runs the risk of the buyer withdrawing. The original buyer would likely have made a lower offer had they known of the increased rate. Any prospective new purchaser will be factoring in the 5% rate prior to making an offer. It is the buyer's responsibility to pay it as you say but the buyer will have costed that in their calculations prior to agreeing a price. Prior to exchange the potential buyer can withdraw on a whim let alone because their costs have just increased.