Tax Consultant Carter Backer Winter
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Stamp duty land tax
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SDLT: Get the rate right

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In a hot residential property market Reshma Johar explores the numerous Stamp Duty Land Tax (SDLT) residential rates currently in place, and expected rate changes coming into effect on 1 October 2021. 

9th Jul 2021
Tax Consultant Carter Backer Winter
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Buyers need to understand the SDLT rates and to budget for the correct amount of tax which will be due on purchases. The land tax return must be submitted alongside payment of SDLT within 14 days after the effective date of the transaction, to avoid penalties and interest charges. That is not long to get the form and payment organised.

Last year’s lockdown saw numerous transactions being placed on hold including property purchases. Between 23 March 2020 to 13 May 2020 moving home was only permitted if ‘reasonably necessary’ and was generally discouraged. 

Once lockdown eased in May 2021 residential property transactions were able to commence again, those who now have the opportunity to work from home on a permanent basis are perhaps reconsidering the location, space and type of property to purchase in an attempt to seek out a ‘better quality of life’. According to the Office for National Statistics, transactions and prices of properties grew considerably in the later half of 2020.

Residential properties are definitely still in demand and one factor is the current ‘Stamp Duty Land Tax (SDLT) holiday’. According to a survey by The Deposit Protection Service and Zephyr Homeloans, 34% of landlord buyers considered the SDLT saving as a key driving factor to invest in a property.

A quick recap

The tables below summarise the SDLT rates for residential property purchases in England and Northern Ireland. Scotland and Wales have their own devolved taxes relating to property purchases. 

In his summer statement in July 2020 the Chancellor temporarily extended the nil rate band for SDLT from £125,000 to £500,000. The temporary extension was to run from 8 July 2020 to 31 March 2021.

At the Budget 2021, the Chancellor further extended this temporarily increased nil rate band for SDLT till the end of June 2021. Described as a ‘staged withdrawal’, between 1 July 2021 to 30 September 2021 the nil rate band will then be reduced to £250,000 before reverting back to £125,000 from 1 October 2021.

In addition, a non-UK resident surcharge was introduced from 1 April 2021. This 2% surcharge will be applied on top of the current residential rates (including the existing 3% higher rate surcharge).

The typical client scenario

Client: ‘I’m looking to purchase a property in England and would like to know the SDLT position’.

Advisor: ‘Great, let me take some details and I will get you some information over to you’.

What to ask:

  • Who will be the purchasers?
  • Timing of purchase
  • Value of property
  • Description of property, land, other buildings
  • Is the property going to be one of a series of purchases with the same vendor?
  • Residence of purchasers
  • Does the purchaser own any other residential property?

The SDLT tables for individuals and trusts:

Rates from 1 July 2021 - 30 September 2021

Bands Basic SDLT rate Basic non-residents SDLT rate Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0% 0% 0%
£0-£250,000 0% 2% 3% 5%
£250,001-£925,000 5% 7% 8% 10%
£925,001-£1,500,000 10% 12% 13% 15%
£1,500,001 and over 12% 14% 15% 17%
 

Rates from 1 October 2021 onwards

Bands Basic SDLT rate Basic non-residents SDLT rate Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0% 0% 0%
£0-£125,000 0% 2% 3% 5%
£125,001-£250,000 2% 4% 5% 7%
£250,001-£925,000 5% 7% 8% 9%
£925,001-£1,500,000 10% 12% 13% 15%
£1,500,001 and over 12% 14% 15% 17%

SDLT payable by non-natural persons

This category of purchaser includes:

  • Companies
  • Partnerships including companies
  • Collective investment schemes

The so-called ‘flat rates’ will apply to the entire consideration where the property value exceeds £500,000:

Rates from 1 April 2021

Bands Higher SDLT rate Higher rate non-residents SDLT rate
Above £500,000 15% 17%
If the property value is below £500,000, the following rates are applied:

Rates from 1 July 2021 - 30 September 2021

Bands Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0%
£0-£250,000 3% 5%
£250,001-£500,000 8% 10%
 

Rates from 1 October 2021 onwards

Bands Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0%
£0-£125,000 3% 5%
£125,001-£250,000 5% 7%
£250,001-£925,000 8% 9%
If the residential property has been acquired to be used for a certain reason ( eg commercial letting), the flat rates do not apply and following variable rates are effective:

Rates from 1 July 2021 - 30 September 2021

Bands Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0%
£0-£250,000 3% 5%
£250,001-£925,000 8% 10%
£925,001-£1,500,000 13% 15%
£1,500,001 and over 15% 17%
 

Rates from 1 October onwards

Bands Higher SDLT rate Higher rate non-residents SDLT rate
£0-£40,000 0% 0%
£0-£125,000 3% 5%
£125,001-£250,000 5% 7%
£250,001-£925,000 8% 9%
£925,001-£1,500,000 13% 15%
£1,500,001 and over 15% 17%

Other rates to remember

It is important to consider the first time buyers’ relief, if that is available to the purchaser, or whether the transaction is linked to another transaction. Where the purchase involves acquiring six or more residential properties bought in a single transaction, the non-residential rates will apply.

It may also be necessary to consider whether the property to be acquired encompasses both residential and non-residential parts.

Final comments

Care is needed when reviewing legislation in order to determine which rates would apply to the purchase. Given the current SDLT saving, there has been an increase in demand for purchases of UK residential property. It would be prudent for tax advisers to provide estimates of the SDLT outcomes if the completion takes place both before and after 30 September 20.

Replies (1)

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By Justin Bryant
09th Jul 2021 16:44

But the SDLT saving before 1.10.21 is only £2.5k at most for =>£250k residential, so is no big deal at all (compared to up to £15k pre 1.7.21) and that's all you really need to know.

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