In an effort to restore confidence to the housing market, Rishi Sunak has today announced that the level at which tax is charged on a property purchase will be raised to £500,000 until 31 March 2021. This change has come into immediate effect.
This represents a big saving for many buyers. The Chancellor has said he expects average Stamp Duty Land Tax (SDLT) to fall by an average £4,500 per transaction and that 9 of out 10 buyers purchasing their main home will pay no SDLT at all.
House Movers (replacing your main home) – The government guidance is that if you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property previously.
The table below shows the rates at which SDLT becomes due:-
|Property Price||SDLT rate|
|Up to £500,000||Zero|
|The next £425,000 (the portion from £500,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
A buyer purchasing a property for £350,000 from today and until the end of March 2021, will save £7,500 in SDLT. A buyer purchasing a property for half a million pounds will save £15,000. Even if the purchase price exceeds £500,000, a buyer will still have the benefit of the reduction in SDLT on the proportion of the price up to £500,000.
From 8 July 2020 to 31 March 2021 the special rules for first time buyers are replaced by the reduced rate announced today. If you are paying £500,000 or less for your first home then there will be no SDLT to pay.
The 3% higher rate for purchases of additional dwellings applies on top of the new rates. This means that some investors will also make savings on SDLT against the previous rates. For example, an investor completing on the purchase of a Buy to Let property for £500,000 will now pay £15,000 in SDLT instead of £30,000. The higher rates at which SDLT becomes due are as follows:-
|Property Price||SDLT rate|
|Up to £500,000||3%|
|The next £425,000 (the portion from £500,001 to £925,000)||8%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||13%|
|The remaining amount (the portion above £1.5 million)||15%|
Buyers must ensure that a Stamp Duty Land Tax Return and payment must be submitted to HM Revenue & Customs with 14 days of completion of your purchase to avoided penalties and interest being charged.
Exciting times are ahead for the property market. Whether you are looking to purchase your first home, buy a new property, or to invest in additional properties, the Residential Property Team at Steele Raymond are primed to give you an uncompromising, high-quality and bespoke service to get things moving.
If you are considering buying or selling a property or would like further advice as to the implications of the SDLT changes, please contact Joanna Staples on 01202 294 566 or email firstname.lastname@example.org. Alternatively, contact a member of our leading Residential Property Team in Bournemouth.
*The information set out in this article is correct at the date of publication (08 July, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected. Visit our Coronavirus (COVID-19) Hub for more Leading Insights.
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