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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.
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.
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