Is the stamp duty holiday calculated on exchange or completion?

The stamp duty holiday was introduced to help buyers save on the costs of buying a house. But does the tax relief apply on exchange or completion?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Row of terrace houses.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Stamp duty is a major cost to budget for when buying a property or land in the UK. Right now, however, most people buying property do not have to pay this tax due to the stamp duty holiday. But when does this tax relief apply? Upon exchange of contracts or on completion?

Let’s find out.

[top_pitch]

What is stamp duty?

It is a tax that you pay if you buy a house or land over a certain price in England or Northern Ireland. Scotland and Wales have their own versions and rates of stamp duty.

The exact amount of stamp duty charged depends on the value of the property and your personal circumstances.

The best way to find out the amount of stamp duty you’re due to pay is to use the stamp duty calculator on the gov.uk website.

What is the stamp duty holiday?

The stamp duty holiday means that if you’re buying a property with a value of up to £500,000 in England or Northern Ireland, you won’t have to pay stamp duty.

The holiday was introduced last year by the government to boost the property market which had been hit hard by lockdown.

The relief was due to end in March 2021. The government has since extended it until the end of June 2021 to allow more buyers to take advantage.

[middle_pitch]

When does the stamp duty holiday apply?

Before we answer this question, let’s distinguish between the two terms.

Exchange of contracts

This is the part of the home buying process where the seller and the buyer legally commit to the transaction and the sale becomes legally binding.

The exchange typically takes place by way of a telephone call between your solicitor or conveyancer and the seller’s. 

Once contracts are exchanged, you’re legally bound to buy the property.

Failure to follow through with the transaction can result in legal and financial penalties. It is therefore crucial that you make sure you’re happy with every aspect of the purchase before you authorise the exchange of contracts.

Completion

Completion is when ownership passes from the seller to the buyer. It’s when you are free to move into your new house.

On completion day, your solicitor will make arrangements for the transfer of the money to the seller’s solicitor. You’ll get keys to your new house as soon as the money reaches their account.

So when is stamp duty paid?

Stamp duty is paid on completion. As long as completion occurs during the stamp duty holiday window, you won’t have to pay the tax.

You have 14 days after completion to file a tax return for stamp duty and pay whatever is due. Your solicitor or conveyancer should calculate and file this for you on the day of completion.

 

What does this mean for those buying property now?

The government has extended the stamp duty holiday until the end of June. What this means is that if you’re hoping to benefit from the stamp duty holiday, you need to have completed your purchase on or before 30 June.

If you exchange on or before 30 June but complete after this date, then you’ll have missed the deadline and will not benefit from the relief.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »