Stamp Duty Land Tax Break
What is Stamp Duty Land Tax (“SDLT”)?
SDLT is a tax imposed in England and Northern Ireland by the government on the purchase of properties. Scotland and Wales also have similar arrangements.
The main purpose of SDLT is to raise funds for the UK Treasury.
SDLT on purchases
In its simplest terms, residential SDLT in England and Northern Ireland are as follows;
1. 0% is paid for properties purchased for £125,000 or less.
2. 2% of the purchase price is paid on properties between value of £125,001- £250,000.
3. 5% of the purchase price is paid on properties between the value of £250,001- £925,000.
4. 10% of the purchase price is paid on properties purchased the value of £925,001- £1,500,000.
5. 12% of the purchase price is paid on properties over the value of £1,500,000.
This is a staggered threshold. By way of an example, if a property is purchased for £500,000, the SDLT payable is not 5% of £500,000. Rather the SDLT will be calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the remaining £250,000 = £12,500
Therefore, a total of £15,000 SDLT is payable on a property purchased for £500,000.
SDLT is not as simple as it seems. For example, buyers with multiple properties will pay a different amount of SDLT as compared to buyers with only one residential home. Buy to let properties are also subject to varying SDLT thresholds. First time buyers do not pay SDLT on properties up to a value of £300,000. Therefore, professional advice should be sought.
Concessions in light of COVID-19
On Wednesday 8 July 2020, the Chancellor Rishi Sunak announced that a break for SDLT will be implemented effective immediately to revive the property market. SDLT will be abolished for properties up to the value of £500,000. The break will last until 31 March 2021.
A detailed guidance will follow in due course. It is expected this will explain SDLT thresholds for properties over the value of £500,000.
If you would like any advice regarding SDLT, please do not hesitate to contact a member of our Property team.