Immediate Changes to Stamp Duty Land Tax

13th July 2020 3:47 pm Comments Off on Immediate Changes to Stamp Duty Land Tax

Stamp Duty Land Tax (“SDLT”) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay to Her Majesty’s Revenue & Customs (“HMRC”).

Chancellor Rishi Sunak today announced that, as a temporary measure, but with immediate effect, buyers won’t pay SDLT on the first £500,000 of the purchase price.

So what has changed?

Prior to today’s announcement (under the “old rules”), all propertybuyers in England and Northern Ireland had to pay SDLT on properties where the purchase price was more than £125,000.

The rate a buyer had to pay under the old rules varied depending on the purchase price and type of property.

The rate at which SDLT was calculated was different depending on whether the property was residential or commercial, you were a first time buyer, or it was a second home or a buy-to-let investment property

The old SDLT rules for buyers of residential property in England and Northern Ireland applied as follows:

  • First-time buyers paid nothing on properties where the purchase price was below £300,000;
  • Buyers pay nothing if the property purchase price was below £125,000;
  • SDLT was charged at 2% if the purchase price was between £125,001 and £250,000;
  • SDLT was charged at 5% if the purchase price was between £250,001 and up to £925,000;
  • SDLT was charged at 10% if the purchase price was between £925,001 and £1.5million; and
  • SDLT was charged at 12% on any property with a purchase price of over £1.5million.

The old SLDT rules forbuyers of second homes or buy-to-let properties were:

  • SDLT was charged at 3%on purchaseprices of up to 125,000;
  • SDLT was charged at 5% on purchase prices of between £125,001 and £250,000;
  • SDLT was charged at 8%on purchase prices of between £250,001 and £925,000;
  • SDLT was charged at 13% on purchase prices of between £925,001 and £1.5 million; and
  • SDLT was charged at 15%on purchase prices above £1.5 million.

So what has really changed?

Technically, the Chancellor has announced that the threshold above which SDLT becomes payable in England and Northern Ireland will be temporarily raised from £125,000.00 to £500,000.00 from today (Wednesday 8 July) until 31 March 2021, as part of his economic statement, delivered today.

Buying for a purchase price of £250,000, a first-time buyer was already “off the hook” and would not have to pay SDLT. A“mover” (i.e. someone selling one home to buy another, on the other hand, would have had to pay SDLT of £2,500. They will now pay nothing if they complete the purchase before 31 March 2021

Under these new SDLT rules, if you complete your purchase before 31 March 2021, and you are a first-time buyer spending £495,000 on a home, you will not have to pay any SDLT which equates to a saving of £9,750 – which is not insignificant.

A mover spending £495,000 on their next home will also not have to pay any SDLT and will therefore save £14,750.

A buyer, whether a first-time buyer or a mover, spending £600,000 on a new home will pay 5% on the portion above £500,000. This equates to an SDLT liability of £5,000, saving £15,000 compared to the SDLT liability that would have arisen under the old regime.

Incredibly, this change of SDLT treatment will apply to the purchase of second homes and additional properties, including buy-to-let investment properties. Under the old SDLT rules, the purchase of a second home or other additional property attracted what was effectively a 3% surcharge, and this will still be in place, but buying property will now be cheaper for investors.

An investor spending £250,000 on a property will now save £2,500, while one spending £495,000 will save £14,750. An investor buying a property for £600,000 will save £15,000.

For more information on SDLT, these changes or to discuss anything about buying or selling a home or an investment property, contact Sid Garg at Colemans on 01628 631051 or by email to sid.garg@colemans.co.uk.

**Please note that this applies only to property in England and Northern Ireland. SDLT rates are different in Scotland and Wales**


Categorised in: Residential Property

This post was written by Colemans Solicitors LLP

© Colemans Solicitors LLP, 2020
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