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Stamp Duty Land Tax: opportunity knocks

  • United Kingdom
  • Real estate
  • Tax planning and consultancy

09-07-2020

From yesterday, 8 July 2020, no Stamp Duty Land Tax ("SDLT") will be charged on the first £500k on most residential acquisitions by individuals.  Not since 1991, when Chancellor Nigel Lawson introduced similar measures, has such momentous stimulus in this area been made available.  More particularly:

  • no SDLT is payable on the first £500k given for purchases of “non-second” homes by individuals; and
  • the lowest 3% rate within the “higher rates” regime, applicable to second homes and acquisitions by companies, applies to the first £500k of consideration. 

Relief is also given for leases of residential property, with the first £500k of rental value SDLT-free.  Such lower rate thresholds were, until yesterday, £125k.  Consideration in excess of £500k will attract the same rates of SDLT as before – see the rates tables below.

This relief applies to transactions completed on or after 8 July, unless already “substantially performed”. A transaction will have been substantially performed, broadly, where a sale contract exists and the purchaser under that contract takes possession of the property or pays 90% or more of the consideration before completion.  The relief is scheduled to cease to apply from 1 April 2021.

Of potential benefit, in particular to the BTR, later living and student accommodation sectors, will be the consequential enhanced “multiple dwellings relief” (“MDR”), with a mere 3% rate applicable to portfolio acquisitions of dwellings where the mean consideration per unit is £500k or less. For example, the purchase of 10 residential units for £5m would, where MDR is claimed, now attract SDLT of £150k (cf. £300k previously). There will of course also be a potential indirect benefit in terms of customers paying less SDLT – with savings of up to £15k.

The flat 15% rate applicable to certain residential acquisitions by non-natural persons remains unaffected.

Standard Residential Rates

£0 - £500,000

0%

£500,001 to £925,000

5%

£925,001 - £1,500,000

10%

The remainder (if any)

12%

Higher Residential Rates

£0 - £500,000

3%

£500,001 - £925,000

8%

£925,001 - £1,500,000

13%

The remainder (if any)

15%

Rental Residential Rates (applicable to value of rental element)

£0 - £500,000

0%

Over £500,000

1%

For more information on SDLT, please get in touch with Paul Beausang, Henry Bolton or Charlotte Stodell (details below) or your usual Eversheds Sutherland contact.