COVID-19: UK Chancellor announces Stamp Duty Land Tax Holiday

The UK government continues to throw its weight behind the housing market's return to health, with the Chancellor of the Exchequer granting a temporary SDLT holiday on the first £500,000 of all residential property purchases in England and Northern Ireland, with immediate effect, potentially saving buyers up to £15,000 on a property purchase.

  Changes to SDLT between 8 July and 31 March 2021
 
The purchase of a dwelling costing up to £500,000 will not incur Stamp Duty Land Tax (SDLT), unless it is an additional dwelling.
 
Purchases exceeding the new threshold will only be taxed on the slice of consideration exceeding £500,000. The relief could therefore save individual buyers up to £15,000 in SDLT on property purchases exceeding the new threshold.
 
Further, anyone purchasing an additional dwelling will only be taxed at the rate of 3% on the first £500,000, with tapered charges for consideration above that level.
 
The SDLT holiday aims to encourage buyers who have taken a financial hit due to Covid-19 to proceed with property purchases, and boost the housing market.
 
What to expect from the SDLT holiday
 
"Only dwelling" rates
 

• If the dwelling costs less than £500,000, no SDLT will be payable;
• Any amount above the new threshold up to £925,000 will be taxed at 5%;
• After that, anything up to £1.5 million will be taxed at 10%; and
• Any remaining amount above £1.5 million will be taxed at 12%.

 
Additional dwelling rates
 

• Dwellings with a value up to £500,000 – 3%;
• Any amount above the new threshold up to £925,000 – 8%;
• After that, anything up to £1.5 million – 13%; and
• Any remaining amount above £1.5 million – 15%.

 
The relief could give rise to some unexpected results, for example where multiple properties are acquired and where mixed use properties are acquired:
 

• Until now, non-residential or mixed rates of SDLT typically gave rise to a lower SDLT liability than residential rates and so identifying non-residential elements in the purchase of a dwelling resulted in savings. 

During the SDLT holiday, however, the residential rates of SDLT will sometimes give rise to a lower SDLT liability than the non-residential/mixed rates depending upon the actual purchase price.
 

• The purchase of a dwelling together with a granny annexe permits a claim to multiple dwellings relief, which results in an SDLT saving. 

However, due to the existence of the 1% minimum rate where the relief is claimed, it will actually be more favourable not to claim the relief for certain lower-value purchases.
 
For information on the UK government's measures to relax legislation concerning the higher rate of SDLT purchasers are required to pay on acquiring a second dwelling, please see our previous article: Government relaxes SDLT rules on 'next home' buyers.
 
To discuss these and other recent developments and guidance on the housing market, please contact one of our residential development specialists: Sue Simpson, Dinah Patel, Helen Andrews and Sinead Thomasson; or to discuss your specialist tax requirements speak to our property tax expert, Nick Beecham.