When George Osborne announced the new Coalition government’s budget in June 2010, we all groaned to hear that the VAT rate would rise to 20% from its current 17.5% in January 2011. And then most of us promptly forgot about it. But with Christmas drawing nearer, the January 4th deadline also creeps closer. Most of us will be aware that our groceries and clothes and even the January sales will be more expensive this year, but what about the cost of moving house?
VAT applies to most things in regards to buying and selling property and so when totalled up, the cost of moving will certainly be more expensive come January 4th. But it really isn't as bad as you might think, particularly if you are prepared. Here are a few expenses that will be affected:
1. Estate Agents Fees – If you have a property to sell, then you will pay estate agent fees. Those fees will vary depending on your estate agent, the area you live in and the property you are selling. For more about the “average” estate agency fees click here. However, let’s take a fee of 1.5% of the sale price for this example:
If you sell your property for £250,000
At a fee of 1.5%
You would pay estate agency fees of £3,750
Plus VAT at 17.5% would be £4,406.25
Plus VAT at 20% would be £4,500
Post January 4th, 2011 you’ll pay £93.75 more.
2. Conveyancing Fees – Your solicitor’s fees are also subject to VAT. Like estate agency fees, conveyancing varies widely in price and will also be affected if you are selling as well as buying. Let’s assume your fees amount to £700.
Conveyancing fees at £700
Plus VAT at 17.5% would be £822.50
Plus VAT at 20% would be £840
Post January 4th, 2011 you’ll pay £17.50 more.
3. Surveyor’s Fees – Another indispensible service for home movers is the survey. If you think you can get away without a survey, read our article about the importance of surveys here. If you decide to opt for a Home Buyer’s report, it generally costs between £250 - £500. For older homes in particular, a full Building or Structural survey is advised at approximately £1,000. Even if you opt for the bare minimum Mortgage Valuation, the fees will still be subject to VAT. Let’s take the middle ground and use $500 in our example.
Surveyor’s fees at £500
Plus VAT at 17.5% would be £587.50
Plus VAT at 20% would be £600
Post January 4th, 2011 you’ll pay £12.50 more.
4. Removal Fees - Ask for quotes from at least 3 different removal firms, as prices vary. Of course, you can do the removal yourself, but this is much more time-consuming and inconvenient. If you are doing the removals yourself, there will still be the costs of van hire (+VAT and insurance), petrol, and return travel from the van hire company when you return it. You will also need about £25 for insurance. All of these expenses will be subject to VAT. For argument’s sake, let’s say removals costs £1,000 for the full service.
Removals fees at £1,000
Plus VAT at 17.5% would be £1,175
Plus VAT at 20% would be £1,200
Post January 4th, 2011 you’ll pay £25 more.
These are just a few examples of some of the costs of moving that will increase when the VAT rises in January.. There are quite a few other expenses to consider including:
• Buildings insurance premiums
• Contents insurance premiums
• Additional removal insurance
• Disconnection of services (water, gas, electricity, telephone)
• Reconnection of services
• Installation of new equipment
• Carpet laying
• Kennelling of pets
• Mail redirection
• Change of address notice
Not to mention the other costs like Stamp Duty, mortgage arrangement costs, land registry fees and local authority searches.
When you do the maths on each individual cost as we did in our examples above, the added expense of the 20% VAT increase is not huge, but added together, the expenses might be a bit more than you were expecting, particularly if you weren’t budgeting for the VAT change.
Here is the good news
The Coalition government has saved all house sellers approximately £250-300 by abolishing Home Information packs. While the outgoing Labour government saved all first time buyers from paying stamp duty on properties up to £250,000 until 24 March 2012.
The really good news is that there are still several months to sell and buy a new property and save some money before the new VAT rate applies in January 2011.
Call Northfields today on 0208 840 6666 to find out how to save money and get yourself moved before January. Or request a valuation online here or register to buy a property online here.