The Chancellor has been generous with a cut in SDLT for first-time buyers, but there are also changes to SDLT which will help divorcing couples.
A temporary exemption or relief from stamp duty land tax (SDLT) was widely expected to be introduced to help with the costs of buying a first home, but Philip Hammond has gone further. A permanent exemption from SDLT will apply to property purchases completed on and after 22 November 2017.
The exemption will apply a 0% rate of SDLT on the first £300,000 of the purchase price of a home, where the total price paid for the property does not exceed £500,000. If the purchase price is more than £500,000 the exemption will not apply and the normal SDLT rates will be charged.
The buyer of the property must be one or more individuals who have never owned a residential property, or an interest in a home, in the UK or anywhere else in the world. The property must be intended to be occupied as the buyers’ main home. Parents who help to fund the purchase of a property by their children must be careful not be named as one of the buyers, as that will block the SDLT exemption if the parent has previously owned a home.
This exemption will not apply to properties in Scotland, which are subject to LBTT. It will only apply to purchases of properties in Wales until 31 March 2018, as the Welsh Land Transaction Tax (LTT) applies from 1 April 2018.
The supplemental rate of SDLT is the extra 3% charge that applies to the entire purchase price when a company buys a residential property, or an individual buys a second home. There have been problems with this charge when couples split up or divorce.
On divorce, the former home may be occupied by one spouse and the children of the marriage but the property remains held in the names of both former spouses. In that case, when the departing spouse buys another home he will pay the 3% charge on the entire purchase price. The law will be changed to prevent the 3% charge applying where the former home is held under a property adjustment order made as part of a divorce.
Similar adjustments to the law will prevent the 3% charge applying where an individual buys a property from their spouse or civil partner. However, anti-avoidance rules will be added to ensure a purchaser disposes of the whole of their former home to someone who is not their spouse when buying a replacement home.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.