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Investors Welcome Stamp Duty Holiday

Couple signing lifestyle opt

Today the chancellor has announced a temporary holiday on stamp duty on the first £500,000 of property sales in England and Northern Ireland, to run until 31 March next year. This is welcome news for the property industry which saw a drop of up to 50% in transactions in Q2 2020.

Key takeaways of Government announcement

  • Threshold increase means 0% Stamp duty payable on residential transactions (main residence) below £500k until 31st March, effective immediately.
  • Buy-to-Let purchasers now only pay 3% up to £500,000 with no base rate.
  • On average, buyers will save £4,500 in SDLT.
  • Nearly 9/10 homebuyers will pay no stamp duty with these changes.
  • The Construction industry is worth £39b to the economy.

What are the changes to Stamp Duty?

If you purchase a residential property as your main residence between 8 July 2020 to 31 March 2021, you only pay SDLT on the value of the property above £500,000. These rates apply whether you are buying your first home or have owned property before.

You can use the table to work out the SDLT due:

Property or lease premium or transfer value 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%

From 8 July 2020 to 31 March 2021 the exceptions for first-time buyers are replaced by the reduced rates set out above.

How does this affect investors (additional property or BTL purchasers)?

Buyers of additional residential properties, such as second homes and buy-to-let properties, usually have to pay an extra 3% in Stamp Duty on top of base rates for each band. The 3% higher rate for purchases of additional dwellings now applies on top of revised standard rates above for the period 8 July 2020 to 31 March 2021.

Put simply, investors now only pay 3% up to £500,000 with no base rate.

The following rates now apply:

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%

Again, these reduced rates apply from 8 July 2020 to 31 March 2021. The below illustration shows the potential saving for for buy-to-let purchasers:

New leasehold sales and transfers

The nil rate band which applies to the ‘net present value’ of any rents payable for residential property is also increased to £500,000 from 8 July 2020 until 31 March 2021.

The following rates will apply:

Net Present Value of any Rent SDLT rate
Up to £500,000 Zero
Over £500,000 1%

Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.

On the 1 April 2021 the reduced rates shown in the above tables will revert to the rates of SDLT that were in place prior to 8 July 2020.

When do the Stampy Duty changes apply?

Stamp Duty changes apply for purchases made from 8 July 2020 to 31 March 2021.

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