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Bounce back stamp duty tax changes for residential investment buyers

Insights /

The Government has announced a nine-month holiday for stamp duty land tax as part of their bounce back strategy following the Covid-19 pandemic.

The changes come into effect from 8 July 2020, and the tax relief will apply to the first £500,000 of all property sales in England and Northern Ireland (Scotland and Wales have separate rules) until March 2021. 

The tax position will now be:

Property or lease premium or transfer valueSDLT rate
Up to £500,000Zero
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%

There is an implication for private rented sector operators or buy-to-let landlords.  

The higher rate surcharge for additional properties applies still, but to the new standard rate, but will generate a saving. The higher rate position now looks like this:

Property or lease premium or transfer valueSDLT rate
Up to £500,0003%
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%

Landlords, most companies, and second-home buyers pay an extra 3% of stamp duty when they purchase a buy-to-let property in England and Northern Ireland. While there will be some tax due, investment owners and commercial operators will see a likely saving on acquisition costs. 

The intention from Government is clearly to boost the housing market. However, whether the tax holiday will have the desired impact remains to be seen. A tax deadline is likely to lead to pinch point in terms of transactions. Getting deals over the line by 31 March 2021 could be a factor, especially with buy-to-let, houses of multiple occupancy (HMOs) or residential investment properties which can require extra due diligence.  

We would recommend that anyone who is thinking about taking advantage of the tax change to consider the lead in time needed and take early advice on the legal review needed.

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