Taxation

Stamp Duty Land Tax (SDLT) : Welcome Break

Chris Stedman
Senior Partner
July 31, 2020
    
5 min read

The government has announced a stamp duty land tax holiday until 31st March 2021 in an attempt to kickstart the residential housing market.

Is it worth much? Since December 2014 SDLT on residential properties has been calculated on a “slice” basis.  This means that increasing rates are applied to the portion of the property value that falls within each band.  Previously we had a “slab” system in place under which a single rate applied to the full purchase price.

There have been two major changes to SDLT which need to be borne in mind:

  1. From April 2016 a 3% surcharge was added for acquisitions of additional dwellings and acquisitions by companies.
  2. From November 2017, subject to certain conditions, first-time buyers pay 0% on the first £300,000 of purchase price and 5% on any excess up to £500,000. The concession does not apply to properties with a purchase price exceeding £500,000.

Before the break

The standard rates were:

IndividualSDLT rateHigher SDLT rateUp to £125,0000%3%£125,001 – £250,0002%5%£250,001 – £925,0005%8%£925,001 – £1,500,00010%13%£1,500,001 +12%15%

So when Alison bought her replacement flat for £450,000 in 2019 the SDLT payable would have been calculated as follows:

£125,000 @ 0%–£125,000 @ 2%2,500.00£200,000 @ 5%10,000.00£12,500.00

Had Alison deferred the purchase until the period 8 July 2020 to 31 March 2021 there would have been no SDLT charge at all!

During the break

The rates applying in the Break period are:

Relevant consideration sliceSDLT rateHigher SDLT rateUp to £500,0000%3%£500,001 – £925,0005%8%£925,001 – £1,500,00010%13%£1,500,001 +12%15%

The break therefore takes the form of increasing the 0% rate and 3% thresholds to £500,000.

And after the break?

The Government will revert to the former position unless there are compelling reasons to change it once again.  However it is expected that an additional 2% surcharge will be introduced on top of the applicable rates for non-UK residents as announced in the Spring 2020 Budget.

Overall comment

Some economists predict that the housing market is bound to suffer from Covid-19 because furloughed employees will struggle to find mortgages.  As a result house prices are expected to drop by March 2021.  But like the US greenback UK house prices always come back.  Here is an opportunity to buy a house for up to £500,000 with no SDLT payable.The advice is to get moving sooner rather than later.  It would be a great shame to lose the relief on 31 March 2021 because someone in the chain defaulted at the last moment.

C&H Stedman

For more info, give us a call today on 01442 202650.

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