The Stamp Duty Land Tax ‘Holiday’

The Stamp Duty Land Tax ‘Holiday’

21 July 2020 Kelly Loft

The Stamp Duty Land Tax (SDLT) ‘holiday’ applies immediately from 8th July 2020 until 31st March 2021. The ‘holiday’ applies to all residential property in England whether liable at standard rates or at higher rates providing completion takes place within the period 8th July 2020 to 31st March 2021. 

What rates are payable from 8th July 2020 until 31st March 2021?

The table below shows the current reduced rates of stamp duty land tax for “standard rate” purchases from 8th July 2020 onwards;

Relevant consideration

Percentage

So much as does not exceed £500,000

0%

So much as exceeds £500,000 but does not exceed £925,000

5%

So much as exceeds £925,000 but does not exceed £1,500,000

10%

The remainder (if any)

12%

 

 

For “higher rates” purchases such as second homes and investment properties (including purchases by companies) an extra 3% of the whole purchase price is payable. This means that the same reduction in the amount of SDLT applies to both main home and second home/investment types of transaction during the SDLT ‘holiday’ period.

It is important to note that there is still a trap for purchases by companies at over £500,000, where the 15% flat rate of SDLT can still apply. Providing one of the reliefs from the 15% rate applies to leave the new SDLT rates (with the extra 3%) in place.

What is the maximum Stamp Duty Land Tax saving?

The maximum saving for a transaction involving one dwelling is £15,000 and applies to purchases at £500,000 or more.

  • The standard rates apply for example where the buyers have no other properties or where they are selling an existing home and buying a new one.
  • The higher rates apply for example where a company buys residential property, or where individuals buy when they own another property and do not meet the “replacement of main residence” criteria.

What happens if I completed my purchase prior to 8th July 2020?

Unfortunately the full amount of stamp duty land tax due under the old rules is still payable, even if it is yet to be paid to HMRC.

What will happen after 31st March 2021?

The stamp duty rates will go back to their previous levels (according to the announcement and the draft legislation). You need to have completed on or before 31st March 2021. It is not enough to take advantage of the ‘holiday’ rates to have just exchanged contracts by the end of March 2021. For non-UK resident purchasers, we are also expecting the extra 2% SDLT to start then.

What about first time buyer’s relief?

First time buyers’ relief does not apply during the ‘holiday’ period. The reduced ‘holiday’ rates are more generous than with the first time buyers’ relief applied - which only gave a relief for up to £300,000 of the purchase price.  First time buyers’ relief is currently expected to revive after 31st March 2021.

What about residential property in Wales?

In Wales Land Transaction Tax (LTT) is payable instead of SDLT. From 27th July, the land transaction tax threshold for main homes in Wales is to be raised from £180,000 to £250,000, however, unlike England the new measure will not apply to second homes or buy-to-let properties. The tax reduction measure in Wales is also set to end on 31st March 2021.

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