Home buyers will be pleased to learn about the new tax break announced today by the government.
The new stamp duty tax break announced by Chancellor Rishi Sunak temporarily loosens the rules on stamp duty, offering exemptions to buyers of properties worth £500,000 or less. Properties worth £500,000 or more will benefit from reduced costs.
What is stamp duty?
Stamp duty Land Tax is a tax paid by people buying properties in England ( and Northern Ireland) property purchasers.
It is typically charged on any properties valued over £125,000 and at different rates starting of 2%. First-time buyers (up to a certain amount) generally benefit from exemptions.
The changes to stamp duty will only apply to buyers in England and Northern Ireland.
What has changed?
The government has increased the lower stamp duty threshold from £125,000 – £500,000 for property purchases in England and Northern Ireland.
That means any property purchases below the new level will not need to pay stamp duty as long as the deal is completed before 31 March 2021.
From today until 31st March 2021, stamp duty land tax will only be charged on properties above £500,000
Residential Rates on purchases from 8 July 2020 to 31 March 2021
If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount that you pay for 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%
Changes for First Time Buyers?
From today to 31 March 2021, the special rules for first time buyers are replaced by the reduced rates set out above.
Higher rates for additional properties
The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period 8 July 2020 to 31 March 2021.
The following rates 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%
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 £500,0001%
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.
This is intended to stimulate the property market which like most markets has been adversely affected the Covid-19 crisis.
Should you require any more information on how the new Stamp Duty rules will affect you or indeed any property related matter, please contact us on 0208 332 2069 or via email: info@jacksonlonge.com