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Stamp Duty Land Tax – Temporary Relief

Insights / 14-07-2020 / London

In the UK, Chancellor Rishi Sunak last week announced a raft of stimulus measures aimed at rebooting the UK economy following the coronavirus pandemic. Noting that the UK housing market dropped by 50% during May, he announced a temporary cut in Stamp Duty Land Tax (SDLT) rates effective for completed purchases between 8 July 2020 and 31 March 2021. 

For those purchasing their first home or replacing their main home, no tax is charged on the first £500,000 of consideration. Average savings are estimated to be around £4,500 and outside of more expensive cities such as London, the majority of home purchases are likely to be tax free.

Home buyers rates;

Up to £500,000

0%

£500,001 - £925,000

5%

£925,001- £1,500,000

10%

£1,500,001 and above

12%

 

Higher Rates Surcharge;

Up to £500,000

3%

£500,001 - £925,000

8%

£925,001 - £1,500,000

13%

£1,501,001 and above

15%

 

However the change is unlikely to affect the high value central London property market. It should be noted that the Higher Rates Surcharge for property investors and second home purchases still remains, albeit with a higher starting threshold (see above). Whilst all tax reductions are welcome, a maximum saving of £15,000 is unlikely to be enough to encourage those investors who were deterred by previous SDLT increases and the introduction of the Annual Tax on Enveloped Dwellings (ATED) for corporates.

A purchase of four properties at £500,000 each may now be more attractive to an investor rather than one £2,000,000 house. First time buyers may then find it difficult to compete with investors looking at that end of the market.

Investors from outside the UK now however have an extra incentive to buy before 31 March 2021. Non UK residents will face an additional SDLT surcharge of 2% with effect from 1 April 2021 so we are likely to see a rush to complete before then, which may be good news for sellers.

Other taxes affecting property investors such as Inheritance and Capital Gains Taxes remain unchanged. Investors are therefore strongly advised to seek appropriate tax advice on structuring any UK property investment as tax efficiently as possible.

Roger Harding

Roger Harding Tax Director

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Tax

Tags:

stamp duty & property tax