Stamp Duty Land Tax (SDLT) : Welcome Break

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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