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Temporary stamp duty land tax changes

The Chancellor, Rishi Sunak, has announced that for those who complete the purchase of a house or flat between 8 July 2020 and 31 March 2021, the first £500,000 of your acquisition price is exempt from stamp duty land tax. This applies whether or not the property is your first property. This has therefore opened up an investment window until March next year for those considering investing in a buy-to-let or second home. The stamp duty holiday for all homes, including second homes and buy-to-let purchases, can potentially save buyers up to £15,000. Ordinarily, buy-to-let investors and second home purchasers pay a 3% stamp duty land tax (SDLT) surcharge on top of the normal stamp duty rates.

The Chancellor has announced that these buyers will only pay the tax at a rate of 3% on the first £500,000 of a property’s price. Previously, second home buyers would pay 3% on the first £125,000, before being charged 5% on the next £125,001 to £250,000, with the rates increasing with the value of the property. The stamp duty holiday will last until 31 March 2021, which is the completion date of the transaction rather than the date of exchange of contracts. Those buying a main home will not be charged any stamp duty at all on the first £500,000. This new tax incentive should act as a real stimulus to the housing market to reverse the current trend of landlords exiting the market due to unfavourable taxation changes, especially at a time when the demand for rental accommodation has never been higher. To illustrate the tax savings, at the lower end, a landlord purchasing a buy-to-let valued at £150,000 should save around £500 on stamp duty, whereas those buying properties worth £500,000 will save around £15,000.

If owners buy a second property before selling their main residence but with the intention of moving home, i.e., the purchase of the new home goes through before the sale of their main residence, then the 3% surcharge will be payable, subject to a refund when the sale does go through as long as this is within a 36 months window. There are however some exceptions to this which will make some allowance for delays in sales if these are caused by the Covid-19 pandemic.

Now, with the normal stamp duty rates having been cut, those buying an additional home, buy-to-let or second home will all benefit in some way. Anyone who purchases a buy-to-let who already owns their main residence has to pay the 3% surcharge, as does anyone who helps a child buy a property.

Companies will not benefit from these changes. In these circumstances, when a company buys a single residential property costing over £500,000, the special 15% flat rate will apply. Additionally, it is only residential property purchases that will benefit from these temporary changes.  The above rates will not change for commercial property acquisitions.

For those who are considering property purchases, whether you are first or second time buyers, there are clear SDLT benefits from completing before 31 March 2021. Contact us at FKGB Accounting Ltd for more tailored tax advice regarding your specific circumstances.