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Following on from the government’s recent announcement today (8 July 2020), there are big changes surrounding Stamp Duty Land Tax.

What is Stamp Duty Land Tax and how much does it cost?

Stamp Duty Land Tax (SDLT) is a tax imposed on the purchase of a property in England and Northern Ireland. It is a form of tax placed on documents, publications and other legal instruments that was once certified by a physical stamp being attached onto the document to represent payment – hence the name!

You most often pay SDLT where a property price is above £125,00.00 when buying a residential property (for example a house or flat) or where the purchase price is more than £40,000.00 for second homes.

The tax applies to both freehold and leasehold properties.

Dependent on the purchase price of a property, the tax was charged at different rates as shown in the table below. Costs before 8 July 2020:

PURCHASE PRICE RATE OF STAMP DUTY ADDITIONAL PROPERTY RATE
£0 to £125,000 0% 3%
£125,001 to £250,000 2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1,500,000 10% 13%
£1,500,001 and over £12% £15%

First time buyers could claim relief from paying SDLT on properties worth up to £300,000.00.

While those buying a new residential property that resulted in owning more than one property, were to pay 3% on top of the usual SDLT where the purchase price was more than £40,000.00 – unless replacing their main residence.

What has changed?

Prior to today, all home-buyers were to pay SDLT on properties over £125,000.00, or £300,000.00 if a first-time buyer.

Chancellor Rishi Sunak has today (8 July 2020) announced that the current £125,000.00 threshold is to be temporarily raised to £500,000.00 in England and Northern Ireland to boost the struggling housing market. The suspension potentially saves future house buyers tens of thousands of pounds!

It is expected that the average SDLT bill will be reduced by £4,500.00, with nine out of ten people now not having to pay the stamp duty land tax at all.

The new rates coming in to force today are shown in the table below.

PURCHASE PRICE RATE OF STAMP DUTY ADDITIONAL PROPERTY RATE
£0 to £500,000 0% 3%
£500,001 to £925,000 5% 8%
£925,001 to £1,500,000 10% 13%
£1,500,001 and over 12% 15%

The special rules for first time buyers are now replaced by the reduced rates set out above.

Those buying second homes will now pay 3% stamp duty on properties up to £500,000.00 instead of the 3% up to £125,000.00.

In addition, companies buying residential property worth less than £500,000.00 will also benefit from these changes.

The stamp duty “holiday” is effective immediately and will last until 31 March 2021.

FAQs

Q: When do the changes come into effect?

A: The changes will be implemented for all completions that take place between 8th July 2020 and 31st March 2021 inclusive.

Q: What has changed?

A: SDLT is usually payable on property purchases from £125,000 and above.  From 08 July 2020 the threshold has been increased to £500,000.  This means that in most cases SDLT is only payable on properties that have a purchase price of £500,001 and above.

Q: How much SDLT will I pay for a property that is over £500,000?

A: You will pay SDLT at 5% for purchases between £501,000 and £925,000.

Q: How long will this reduced tax apply?

A: Currently the SDLT holiday will last until 31 March 2021.

Q: Has anything changed for first time buyers?

A: First time buyers will not pay any SDLT for purchases up to £500,000. For purchases over this amount they will pay the same temporary SDLT rates that are in place until 31st March 2021.

Q: I’m buying an additional property – what rate applies to me?

A: SDLT on additional property purchases will be calculated at 3% for purchases up to £500,000 and 8% for purchases from £500,001 to £925,000.

Q: Will I ever need to pay this SDLT back?

A: No, these temporary changes are not a loan or deferred payment. If your transaction completes within this time period the temporary rates will apply.

Q: I recently completed a purchase of a property; can I reclaim the SDLT that I paid:

A: Unfortunately not, these new rates only apply to transactions that completed between 8th July 2020 and 31st March 2021 inclusive.

Contact

To find out more about the recent announcement regarding SDLT and the conveyancing process, please call Hayley on 0191 243 8167.