Stamp Duty Land Tax holiday – what does it mean for home buyers?

Thu 16th Jul 2020

A Stamp Duty Land Tax holiday has been introduced to boost the residential property market. Chloe Liddicoat, Chartered Legal Executive in Coodes Solicitors’ Residential Property team, explains what it means for house buyers.

The Government introduced a Stamp Duty Land Tax holiday on 8 July 2020 in an effort to get the property market moving. It will run until 31 March 2021.

All transactions liable for stamp duty that complete during this period will be subject to a Stamp Duty Land Tax (SDLT) reduction.

This represents a significant reduction in the costs incurred in buying a property. We are already starting to see increased demand from buyers who wish to take advantage of the rule changes.

How much stamp duty will I save if I am moving house?

For purchases up to the value of £500,000, where the property is the buyer’s main residence, there will be no stamp duty payable. For higher value purchases over the £500,000 threshold the reduction will depend on the price of the property.

For example, if you are selling your current main residence and completing on your new main residence on the same day, for a purchase value of £300,000, the SDLT liability will be reduced from £5,000.00 to £0. On a purchase of £600,000, the liability will be reduced from £20,000 to £5,000.

This table, from gov.uk shows the standard rate SDLT percentage calculations.

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%

What about second homes or buy to let properties?

The Stamp Duty Land Tax holiday also covers the purchase of second homes or buy to let properties. While the tax liability in these transactions will be reduced, buyers will still pay some SDLT on completion.

Those buying second homes will benefit from the SDLT holiday on standard rates of SDLT, but will still be liable for the 3% higher rate of tax. This tax is already applied to those individuals buying second homes.

For example, if you are purchasing a second home, the SDLT liability for a property selling for £300,000 has reduced from £14,000 to £9,000.

This table, from gov.uk, shows the higher rate SDLT percentage calculations.

Property or lease premium or transfer value 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%

What happens when the SDLT holiday ends?

We would emphasise that from 1 April 2021, reduced rates will revert to the rates of SDLT that were in place prior to 8 July 2020. The UK’s national average for completion of a purchase property is 12 weeks (from the date that the sale is agreed, to the date of legal completion).

Those looking to purchase in the first quarter of 2021 may therefore miss out on the SDLT holiday due to limited time for the legal work required to complete the matter. Buyers should also consider potential delays as a result of the title, legal or issues arising from the chain. Starting the process as early as possible will give you the best chance of taking advantage of the Stamp Duty Land Tax holiday.

For further advice, please contact Chloe Liddicoat on 01726 874700 or chloe.liddicoat@coodes.co.uk

Thu 16th Jul 2020

Chloe Liddicoat

Chartered Legal Executive

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