The end of the stamp duty holiday is fast approaching

Latest UK property statistics show a significant increase in property transactions which is a likely to be linked to the stamp duty holiday. The 30 June 2021 deadline is fast approaching, although there are still significant savings to be made.

The stamp duty holiday was initially introduced by the Chancellor, Rishi Sunak, in July 2020, as the country was coming out of its first lockdown due to the coronavirus and was expected to apply until 31 March 2021. However, in the Spring Budget, the stamp duty holiday was extended until the end of June 2021. The extended stamp duty holiday means no stamp duty land tax (SDLT) is payable on the first £500,000 of property purchases in England and Northern Ireland.

Note: first-time buyers were not subject to SDLT if the property was valued at £300,000 or below. However, from 8 July 2020 to 30 June 2021 they can buy property valued at up to £500,000 without incurring stamp duty.

These rates apply whether an individual is buying their first home or if they have owned property before and are as follows:

Property or lease premium or transfer value 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%

Then, from 1 July 2021 until the end of September 2021, this amount will be reduced to £250,000 as follows:

Property or lease premium or transfer value SDLT rate
Up to £250,000 zero
The next £675,000 (the portion from £250,001 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%

From 1 October 2021, the stamp duty rates are expected to return to normal:

Property or lease premium or transfer value SDLT rate
Up to £125,000 zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 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%

It is, however, important to remember that anyone purchasing an ‘additional’ residential property will be charged a 3% surcharge on each of the threshold bands. This means that those buying a second property to let out will also benefit from the stamp duty holiday, but will need to pay the 3% surcharge.

In addition, companies buying residential property for less than £500,000 between 8 July 2020 and 30 June 2021 will benefit from the Government changes, as will companies that buy residential property of any value when they meet the relief conditions from the corporate 15% stamp duty land tax charge.

When looking at HMRC’s property statistics, over more recent months there has been an increase in property transactions which is a likely to be linked to the stamp duty holiday.

Case study

Jonathan owned a flat in Manchester for a number of years. He then relocated to London having sold his flat and moved into rental accommodation. At the time he had no capital gains tax to pay as the gain was covered by the private residence exemption. He is now considering buying a flat in London. He does not own any other property at the current time.

So, what SDLT savings can Jonathan make depending on the purchase price of his new property and when he completes the purchase?

Purchase price Complete by 30 June 2021 Complete between 1 July 2021 and 30 September 2021 Complete on or after 1 October 2021
£500,000 £0 SDLT £12,500 SDLT £15,000 SDLT
£600,000 £5,000 SDLT £17,500 SDLT £20,000 SDLT
£800,000 £15,000 SDLT £27,500 SDLT £30,000 SDLT
£1,000,000 £28,750 SDLT £41,250 SDLT £43,750 SDLT

The 30 June 2021 deadline is fast approaching, although the above figures show that there are still significant savings to be made. If completion can take place by the 30 June deadline the SDLT saving is £12,500 compared to completing on or after 1 July, and £15,000 compared to completing on or after 1 October. The saving falls to £2,500 if completion takes place between July and September compared to completing on or after 1 October.

Note that the Welsh Government’s temporary £250,000 Land Transaction Tax 0% band for residential property also ends on 30 June, in line with the timing of the end of the £500,000 SDLT 0% band. However, in Scotland, the Land and Buildings Transaction Tax enhanced 0% band of £250,000 ended on 31 March, and was replaced by a 0% band of £145,000.

If you currently looking to buy a property, and need mortgage assistance, please contact your adviser who can put you in touch with our mortgage partners.

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Source: Techlink

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