Chancellor of the Exchequer, Rishi Sunak announced on 8th July 2020 changes to the threshold at which homebuyers in England and Northern Ireland are required to pay Stamp Duty Land Tax (SDLT). It is hoped that the temporary cut will boost the Country’s housing market and stimulate economic recovery after the impact of Coronavirus.
What is Stamp Duty?
Stamp Duty (SDLT) is a land tax you may have to pay if you buy property or land in England and Northern Ireland. Stamp duty is payable within 14 days from the date of completion otherwise HMRC will charge penalties for late payment.
Stamp Duty potentially may also be payable if the matter concerns Transfer of Equity and Lease Extensions, depending on the particular circumstances of the transaction and if there is considered to be any chargeable consideration – However, the scope of this article is to consider Stamp Duty changes in the context of buying a property or land only.
If you’re buying your main residential property between 8 July 2020 and 31 March 2021, you will not have to pay Stamp Duty on properties costing up to £500,000 (while in Scotland and Wales the threshold has risen to £250,000) saving up to £15,000 in SDLT. The holiday will apply whether you’re a first-time buyer or have previously owned a property.
How much Stamp Duty will I pay now?
If the property you are purchasing is your main residence you won’t pay any stamp duty if it costs £500,000 or less.
If the property price is in excess of £500,000 you will be taxed at 5% until £925,000, and the £575,000 after that will be taxed at 10% until £1.5 million. The remaining amount, over £1.5 million will attract 12% tax. You can calculate how much you are liable to pay here.
Before the Chancellor’s announcement, stamp duty in England and Northern Ireland was only paid on land or property sold for £125,000 or more, whilst first-time buyers did not pay any stamp duty on purchase up to £300,000. The temporary stamp duty holiday replaces the first-time buyer discount.
Property investors, landlords and second home buyers also benefit from the tax holiday but will still have to pay the extra 3% of stamp duty (higher rate) they would have been charged under the previous threshold.
Can I still benefit if I’ve already completed a purchase?
The stamp duty holiday only applies from 8 July 2020, which means anyone who completed a property purchase prior to that date will have to pay the normal rate of stamp duty.
Stamp duty is payable on completion, so if you’ve exchanged contracts and are currently waiting to complete you will be able to benefit from the change and your solicitor should advise you accordingly.
A property law firm is calling on the government to backdate the stamp duty holiday to include those buyers who completed during the lockdown. However, to date no announcement of any refunds have been made.
How does the stamp duty holiday work for second homes and buy-to-let purchases?
Those purchasing second homes or buy-to-let properties also benefit from the stamp duty holiday. Property investors and landlords who purchase through limited companies will also benefit on purchases up to £500,000. However, the extra 3% of stamp duty (higher rate) on those purchases will still apply.
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