On 8 July 2020, in an effort to help kickstart the economy, the Chancellor of the Exchequer announced that a Stamp Duty Land Tax (SDLT) holiday would come into immediate effect, to run until 31 March 2021. During this period, individuals will not have to pay any SDLT on the first £500,000 of property purchases in England and Northern Ireland.
The announcement of an SDLT holiday is the most significant development in property tax since the introduction of relief for first-time buyers introduced in the 2017 Budget. This development will no doubt be of interest to homeowners and investors alike, and will probably result in an increase in activity within the property market.
What was the SDLT position?
Before the Chancellor’s announcement, SDLT was payable on property transactions over the value of £125,000 at a rate of:
- 2% on £125,001-£250,000
- 5% on £250,001-£925,000
- 10% on £925,001-£1.5m
- 12% on any value above £1.5m.
The position was slightly different for first time buyers, who only paid SDLT on the value of the property which exceeded £300,000 (i.e. 5% on £300,000-£925,000 etc.)
The position during the SDLT holiday is that there will be no SDLT payable on the first £500,000 paid towards the purchase of a property. Taking the example of a homeowner looking to purchase a new home for £650,000, the SDLT payable on this transaction would normally have been £22,500. During this SDLT holiday, however, the same transaction will result in an SDLT liability of only £7,500 creating a saving of £15,000.
Does the SDLT holiday apply to second home purchases and buy-to-Lets?
Yes. These types of transactions will still attract the ‘higher’ SDLT rate of +3% and so the inclusive rates during the SDLT holiday will be:
- 3% on £0-£500,000
- 8% on £500,001--£925,000
- 13% on £925,001-£1.5m
- 15% on any value above £1.5m.
Using a similar example to the one above, if a homeowner looked to purchase a buy-to-let property for £650,000, the SDLT payable on this transaction would normally have been £42,000. During the SDLT holiday, however, the same transaction will result in an SDLT liability of only £27,000 creating a saving of £15,000.
Does the SDLT holiday apply to commercial and ‘mixed-use’ property?
No. Purchasers of commercial property and ‘mixed-use’ property will not benefit from the lower SDLT rates at this time.
Who is eligible?
The SDLT holiday will apply to all residential property purchases and is subject only to the purchase completing between 8 July 2020 and 31 March 2021. If you have exchanged contracts but you have not yet completed – and if completion occurs during the holiday period – then you will still benefit from reduced SDLT liability.
It’s important to note that the SDLT holiday applies only to residential properties purchased in England and Northern Ireland. It is yet to be seen whether similar changes will come into effect in Scotland and Wales.