What has been announced?
The Chancellor of the Exchequer, Rishi Sunak, has today announced temporary Stamp Duty Land Tax (“SDLT”) thresholds applicable to residential properties.
The minimum threshold has been increased with immediate effect to £500,000.00 until 31 March 2021. This means that any purchaser buying a residential property between 8 July 2020 and 31 March 2021, up the value of £500,000, will be exempt from paying SDLT.
What are the usual rates of stamp duty?
The usual rates of stamp duty mean that purchasers do not have to pay SDLT on the first £125,000 of the purchase price.
The current residential SDLT thresholds are based on the following property valuation bandings:
• 2% if property value between £125,001 to £250,000;
• 5% if between £250,001 to £925,000;
• 10% if between £925,001 to £1.5 million; and
• 12% if value above £1.5 million.
What are the new temporary rates of stamp duty?
The new residential SDLT thresholds will be based on the following property valuation bandings:
• 5% if property value between £500,001 to £925,000;
• 10% if £925,001 to £1,500,000; and
• 12% if value above £1.5 million.
Will first time buyers benefit?
First time buyers do not pay SDLT on the first £300,000 of the purchase price, but do pay 5% on the portion between £300,001 to £500,000. The reduction will therefore provide additional benefits to first time buyers.
How will it affect buyers using the shared ownership scheme?
Buyers of new shared ownerships homes should be advised to elect to pay SDLT on the full market value (FMV) of their home, which will be £0.00, rather than on the value of their share. Having elected to pay SDLT on the FMV at the time of buying the first tranche of shares, they will not incur additional SDLT fees should they buy more shares in the future.
What about purchasers including companies buying additional properties such as holiday homes or buy to let properties?
A 3% higher rate of SDLT is payable for purchases of second homes such as holiday homes or buy to let properties worth more than £40,000. Companies buying residential property also pay the higher rate. This is charged at 15% to companies where the property value is £500,000 or more, although exclusions can apply. Thus, the new rates will assist purchasers of holiday homes and buy to let properties including companies who will benefit from having to only pay the higher rate on properties valued up to £500,000.
What if I have already completed my purchase?
Unfortunately, the temporary rates are not retrospective. This means that where you have recently completed your purchase you will be liable for the usual rates of SDLT.
What is the impact of the temporary SDLT changes likely to be?
From 1 April 2021 the SDLT thresholds will revert back to the usual SDLT rates. It is likely that the move will increase a rush in short term activity in the residential property market. However, such activity will largely depend upon mortgage availability which continues to be constrained following the pandemic.
For further information or to request a fixed fee conveyancing estimate incorporating our no-move-no-fee policy, please do not hesitate to contact our new business team on 01489 864 131 or by e-mail to enquiries@lawcomm.co.uk
This article was written on 8 July 2020 and does not constitute legal advice
