The Law Society’s Conveyancing Quality Scheme has released further clarifications on the temporary Stamp Duty Land Tax holiday for residential buyers
The report reads
“As you will be only too well aware on 8 July, the Chancellor of the Exchequer announced a temporary reduction to SDLT rates as a result of coronavirus (COVID-19) to take effect from 8 July and remain in effect until 31 March 2021.
Transaction volumes were significantly down during lockdown and June saw negative annual house price growth for the first time since 2012. The market has of course since changed.
The temporary SDLT cut works by raising the standard residential property value threshold from which SDLT begins to be paid from £125,000 to £500,000. This means that 0% is charged on the first £500,000. For properties purchased for more than that threshold the previous rates continue to apply to the excess above £500,000.
The higher rates of SDLT for additional dwellings (second homes) are 3% more than the standard residential property rates of SDLT applied to the whole consideration (both before and after 8 July). It means that after 8 July the SDLT higher rates are reduced by a corresponding amount to the reduction in the standard rates.
This works in effect by applying the 3% SDLT surcharge for purchases of second homes to the whole consideration on top of the temporarily reduced standard rates. The result is that a rate of 3% is applicable after 8 July to the whole of the first £500,000 for purchases of second homes (and 8% between £500,000 and £925,000 etc.).(Compare that with higher rates of SDLT before 8 July that resulted in a rate of 3% under £125k and 5% between £125k and £250k etc.)
By way of reminder, there is a base £40k figure as a condition for the 3% charge applying. If the chargeable consideration is less than £40k the 3% additional charge does not apply, and the transaction is not notifiable. If it is over £40k it applies to the whole consideration where the other conditions to its application are met.
These reduced rates apply to transactions that are completed or substantially performed between 8 July 2020 and 31 March 2021 inclusive. The temporary rates do not apply where the transaction was completed or substantially performed before 8 July 2020.
HMRC has produced guidance on the temporarily reduced rates.”
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credits: The Law Society