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Reduced rates of SDLT for residential properties

The March 2021 Budget extended the Stamp Duty Holiday which will now end on 30 June 2021 with a further transition period for the nil rate band. This briefing explains the changes made to Stamp Duty Land Tax (SDLT) during the pandemic and the tax changes for property purchasers this year. This is part of a series of briefings on SDLT – click here for our briefings on the changes introduced last year, the impact of changes on second property purchasers and considerations for non-UK resident property purchasers.

On 8 July 2020, the Chancellor of the Exchequer announced a temporary cut in SDLT. This was part of the Government’s response to the Coronavirus pandemic and to help address its effect on the economy, The threshold below which no SDLT is payable was raised from £125,000 to £500,000. Thresholds for the 5%, 10% and 12% “steps” were kept the same so the effect on the purchase of a £2 million property was:

Pre 8 July 2020:

£0 – £125k                         0%                         £0

£125k – £250k                   2%                         £2,500

£250k – £925k                   5%                         £33,750

£925k – £1.5mill                10%                        £57,500

£1.5mill – £2 mill               12%                        £60,000

Total                                                                £153,750

Post 8 July 2020:

£0 – £500k                         0%                        £0

£500k – £925k                   5%                        £21,250

£925k – £1.5 mill               10%                       £57,500

£1.5 mill – £2 mill              12%                       £60,000

Total                                                               £138,750

The major beneficiaries of this tax “holiday” were those purchasing in the mid-range of the market where a property bought for £500,000 would pay no SDLT rather than £15,000. The holiday was set to end on 31 March 2021.

During the first national lockdown there was a fall of 50% in residential property transactions. However, the SDLT changes combined with a lack of housing stock available led to Nationwide’s December 2020 house price index reporting annual house price growth at a six year high of 7.3%.

As with any temporary change, it is much easier to decide when to start it than when to end it and the onset of a third national lockdown in January 2021 led to calls for the holiday to be extended. The Budget in March 2021 confirmed that it the holiday would indeed be extended to 30 June 2021.

Arguments in favour of an extension were that the increase in transactions combined with continuing difficulties in the conveyancing process due to COVID 19 restrictions meant that buyers were experiencing unexpected delays. Property website Rightmove estimated that as many as 100,000 buyers had rushed to complete transactions before the end of March deadline and that possibly a further 300,000 will benefit from the extended holiday.

The Budget extended the current regime to 30 June 2021 and also introduced a transition period from 1 July to 30 September 2021 when the nil rate band will be £250,000 before returning to £125,000 on 1 October 2021.

The 3% surcharge on the purchase of additional dwellings has remained in place for the whole period.

It is estimated that the average time taken from agreeing an offer to completion has risen from 12 to 22 weeks so any buyer looking to take advantage of the reduced rates will need to act fast.  Our Tax and Private Client and Property teams are on hand to advise you on all aspects of the purchasing of residential property.


Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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