Preparing for the end of the Stamp Duty Holiday

Introduced in July 2020, the Stamp Duty Land Tax (SDLT) Holiday has helped hundreds of homeowners and investors to reduce the cost of purchasing a new property.

However, the higher SDLT thresholds will change from 1 July 2021 increasing the cost of buying or transferring a home.

From the beginning of July 2021, the SDLT rules will change so that the threshold at which tax is paid falls from £500,000 to £250,000.

This new rate of SDLT will remain in place until 1 October 2021, when the threshold  will be reduced further to £125,000, which was the original level prior to July 2020.

The new rates will be as follows:

Property or lease premium or transfer value from 1 July SDLT rate
Up to £250,000 0 per cent
The next £675,000 (the portion from £250,001 to £925,000) 5 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 10 per cent
The remaining amount (the portion above £1.5 million) 12 per cent

 

Property or lease premium or transfer value from 1 October SDLT rate
Up to £125,000 0 per cent
The next £125,000 (the portion from £125,001 to £250,000) 2 per cent
The next £675,000 (the portion from £250,001 to £925,000) 5 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 10 per cent
The remaining amount (the portion above £1.5 million) 12 per cent

Despite the changes, first-time buyers paying £300,000 or less for a residential property will continue to pay no SDLT and will only pay five per cent on properties worth between £300,000 and £500,000..

For landlords and investors, the impact will be far greater as they must pay an additional three per cent surcharge on each rate if they own more than one property already.

The costs could be even greater if the investor is non-resident in the UK due to the new two per cent surcharge for overseas buyers of UK property that has been introduced from April on top of the existing three per cent additional home surcharge.

For them, from 1 July, they could pay the following rates on property purchases or transfers if they already own a property in the UK:

Property or lease premium or transfer value from 1 July SDLT rate
Up to £250,000 5 per cent
The next £675,000 (the portion from £250,001 to £925,000) 10 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 15 per cent
The remaining amount (the portion above £1.5 million) 17 per cent

 Homebuyers, landlords and property investors need to carefully consider these changes as they could have a substantial impact on property values. It is also important to remember the changes that were introduced in April 2020, when selling UK residential property, as the transaction may need to be reported to HMRC within 30 days of completion together with any tax due.