Summer holiday cancelled? Make the most of a Stamp Duty Land Tax holiday instead

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About Shanice

By Shanice Golder

On 8 July 2020, the Chancellor, Rishi Sunak, announced that there will be a temporary ‘holiday’ on Stamp Duty Land Tax (SDLT) on the first £500,000 of the purchase price of properties in England and Northern Ireland, which could mean many people will have little or no SDLT to pay on their purchase.

This change has come in with immediate effect (from 8 July 2020) and is set to last until 31 March 2021.

SDLT is a tax payable on the purchase price payable by anyone buying a property or land (or lease extension premium) costing more than a set amount in England and Northern Ireland.

Previous tax threshold

Prior to the recent change, the tax threshold for buying your only property or replacing your main residence (subject to qualifying conditions being met), was £125,000, i.e. there would be no tax to pay on the first £125,000 of the purchase price. The remainder of the purchase price was taxed at the rates set out in the table below:

Property or lease premium or transfer value SDLT rate
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000 2%
The next £675,000 (the portion from £250,001 to £925,000 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%
   

New tax threshold from 8 July 2020 to 31 March 2021 - what could this holiday mean for me?

As a result of the tax threshold being increased to £500,000, if the property purchase is to be your only interest in any property in the UK or abroad, or you are replacing your main residence (subject to other qualifying conditions), there will be no SDLT to pay if the purchase price is £500,000 or less.

Anything above the £500,000 threshold will be taxed at the rates set out in the table below:

Property or lease premium or transfer value SDLT rate
Up to £500,000 Zero
The next £425,000 (the portion from £500,001 to £925,000 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%
   

Buying a second property?

For purchases of an additional property that is not replacing your main residence (subject to other qualifying conditions), a 3% higher rate for applies on top of the new threshold and will be calculated in accordance with the table below:

Property or lease premium or transfer value SDLT rate
Up to £500,000 3%
The next £425,000 (the portion from £500,001 to £925,000 8%
The next £575,000 (the portion from £925,001 to £1.5 million) 13%
The remaining amount (the portion above £1.5 million) 15%
   

Exchanged already?

SDLT is payable upon completion, so if you have exchanged contracts and are currently waiting for completion you will be able to benefit from the holiday. If you completed before 8 July 2020, unfortunately the previous threshold will apply.

If you are considering buying in the near future or at the start of next year, in order to benefit from the holiday, you will need to complete on a purchase by the 31 March 2021. SDLT needs to be paid to HMRC within 14 days of completion, although if you require a mortgage, your lender will require this to be paid on completion.

Positive news

It is anticipated that the incentive of a potentially large tax saving as a result of the tax threshold increase will encourage people to buy properties or land. The Treasury have said that, as a result of this ‘holiday’, 9 out of 10 people purchasing or downsizing this year will pay no stamp duty.

The change has been acclaimed in helping to boost the property market after and during what has been a time of uncertainty and a downward slump in property sales.

At TWM, we have an expert conveyancing team who would be happy to assist you with buying and selling your home or property investment. For further information, please contact jonathan.potter@twmsolicitors.com.

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