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SDLT update: the key points in the Chancellor’s summer statement

Posted: 09/07/2020


On 8 July 2020 the Chancellor of the Exchequer announced that the nil rate threshold for stamp duty land tax (SDLT) - that is, that part of the consideration at which no SDLT is paid - would be increased from £125,000 to £500,000 for purchases between 8 July 2020 and 31 March 2021.

The Government has published further detail on this SDLT change and how it would apply. Broadly speaking, save for the increase of the threshold at which no SDLT is paid, the SDLT rules remain the same.

First time buyers and those replacing their main residence

For first time buyers and those who are replacing their main residence, there will be no SDLT on the first £500,000 of consideration paid. The ordinary rates of SDLT will apply to any consideration over £500,000. The rates are as follows:

Consideration                                     

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%

Those with second homes

The 3% additional rate of SDLT which applies to purchases of additional properties is not affected by these changes and will still apply on top of the revised ordinary rates of SDLT. The higher rates of SDLT apply to purchases of residential property in England at a time when that individual already owns another residential property (anywhere in the world), and the property they are purchasing is not replacing their only or main residence. Such buyers will still benefit from these changes as only the additional rate will be payable for purchases up to £500,000. The rates which apply to additional property purchases are as follows:

Consideration                                     

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%

Companies

Currently companies that purchase residential property worth over £500,000 pay a 15% flat rate of SDLT unless a relief or exemption applies, for example where the property purchased is part of a property rental business. Where a relief applies, the higher rates of SDLT apply (rather than the company rate). Similarly, where a company purchases a residential property worth under £500,000, the higher rates of SDLT would usually apply. It has been confirmed that companies will benefit from these changes too.

The Government has also confirmed that on 1 April 2021 the reduced rates will revert to the rates of SDLT that were in place prior to 8 July 2020. We note that the Government is planning on introducing a supplemental 2% rate for non-resident buyers from April 2021. Any non-resident thinking of purchasing a residential property may wish to make use of the current reduced rates of SDLT.


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