On Wednesday 8th July 2020, Chancellor Rishi Sunak, produced a “Summer Economic update” which announced various measures to alleviate the impact of the COVID-19 pandemic on the economy.

Amongst the measures introduced, was an important temporary change to stamp duty land tax (“SDLT”) for purchases of residential property.  The change is currently effective from 8th July 2020 until 31st March 2021.

The change announced has increased the nil-rate band threshold for SDLT on residential purchases from £125,000 to £500,000.  This means that until 31st March 2021, anyone buying a residential home in England and Northern Ireland as their primary residence will not pay SDLT on any property that has a value below £500,000.

It is also important to highlight that since SDLT is based on a slice system (as shown in the table below), purchases of residential property having a value of £500,000 or more will still benefit from an SDLT saving.

For example, before this change the purchase of a residential property costing £700,000 would have been subject to SDLT of £25,000.  Following the change, the SDLT will be reduced to £10,000, representing a saving of £15,000.

The revised rates are as follows:

Property or lease premium or transfer value

SDLT rate

up to £500,000

0%

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%

The higher rates of SDLT still apply to purchases of additional dwellings, for example, second homes and buy-to-let properties.  However, the 3% higher rate now applies on top of the revised standard residential rates in the table above.  This means that purchases of an additional dwelling costing more than £125,000 will also benefit from an SDLT saving as a result of these changes.

For example, before this change the purchase of an additional dwelling costing £300,000 would have been subject to SDLT of £14,000.  Following the change, the SDLT will be reduced to £9,000, representing a saving of £5,000.

The revised rates which apply to purchases of additional dwellings are as follows:

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%

the remaining amount (the portion above £1.5 million)

15%

For any questions regarding the temporary change to SDLT, then please contact Sarah Illidge (Tax – Senior Solicitor) on 0114 228 3277 or sarah.illidge@luptonfawcett.law.

If you are considering a residential property purchase, then you may also wish to speak to Sarah Sargent (Head of Residential Property) on 0114 228 3281 or sarah.sargent@luptonfawcett.law

 

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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