Stamp duty holiday extended
By Emily Coomber, Woodstock Legal Services
Following the announcement in his Budget, buyers and sellers will be relieved to hear that the stamp duty holiday on house purchases has been extended for a further three months.
The announcement in last week’s budget was a complete u-turn from the Chancellor’s statement in December 2020, which outlined that he had no intention to grant any further extension.
The SDLT holiday was initially intended as a stimulus for the property market, and many buyers were encouraged to enter the market as a result. Many homeowners escalated their plans to move in order to make the deadline and benefit from the tax relief. However the looking deadline was seen my many in the industry as a cliff-edge and buyers and sellers alike were beginning to worry as the end of March date loomed closer.
This news of the extension will therefore likely come as a relief for both buyers and sellers who were hoping to take advantage of the holiday, yet with the initial deadline looming, were not so optimistic about their transactions completing in time.
The move to extend the SDLT holiday also aims to help buyers who may have taken a financial hit because of Covid-19 and is also intended to boost a property market hit by lockdown.
Last Wednesday’s budget announcement confirms that property purchase tax will continue to be suspended on the first £500,000 of all sales in England and Northern Ireland until the end of June. Additionally, the nil rate band will be set at £250,000 - double its standard level - until the end of September. This second reduction is aimed to really help buyers at the lower end of the market. It is also hoped that the extra three-month taper until October will make any ‘cliff-edge’ in June feel less steep.
So What is Stamp Duty and How Does it Work?
Stamp Duty Land Tax is a tax paid on the purchase of property or land in England and Northern Ireland.
The tax is not payable on the whole of the purchase price, just on the figure over a certain amount. This ‘initial threshold’ is where SDLT starts to apply.
With the new rules being extended, it now means that if you purchase a property for under £500,000 before the June deadline, there is no SDLT to pay.
On purchases over £500,000, buyers will have to pay a 5% tax on the portion of the sale price which is over £500,001 and up to £925,000, then 10% on the portion from £925,001 to £1.5 million, and then pay 12% on any portion over £1.5 million.?
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The SDLT holiday means that you don’t have to start paying tax until the price is over £500,000. This is likely to significantly help buyers at the lower end of the market – as they may find they are not required to pay any tax at all – but it will also help those buying slightly higher value properties because they will still have the first £500k tax free until June.
Then, rather than the worrying ‘cliff edge we were expecting in March 2021, there will be a staggered reduction from the end of June:
I. On property purchases from 1 July to 30 September 2021, the SDLT?threshold on residential properties will be reduced from £500,000 down to £250,000.
II. Then, from the 1st October the SDLT threshold will be back to its usual level of £125,000 for residential properties.
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