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Stamp Duty holiday: your questions answered

The housing market is currently enjoying a boom, as buyers rush to take advantage of the temporary Stamp Duty Land Tax (SDLT) holiday, which was introduced as part of a range of measures designed to provide economic support through the Covid-19 pandemic.

Until 31 March 2021, the normal rate of SDLT on the first £500,000.00 of residential property purchases is zero before reverting back to the standard tiered rates on purchases where the market value is more than £125,000.00. Here, SDLT specialist Fiona Phillips of Andrew Jackson Solicitors LLP answers some questions about the temporary rate change.

 

I exchanged contracts in June to buy a property for £450,000, but problems with the seller has meant that completion won’t take place until December 2020. Which SDLT rate am I paying?

The good news is that SDLT is calculated using the rates in force on the date of completion, meaning this purchase will be at the new rate. If the property is your only residential property, or the replacement of your main residence, then SDLT will be nil, as it is below the £500,000 threshold.

I have had an offer of £800,000 accepted on a main residence. What SDLT will be payable?

As there is now no SDLT on the first £500,000 of consideration, the SDLT due will be due only on £300,00, which is £15,000.

In order to enjoy “staycations” in the future I am going to buy a holiday home in England. I know that second homes are charged at a higher rate, so will this purchase benefit from the rate change?

Second homes, buy-to-let and holiday properties all are charged at at the normal rate plus a 3% surcharge. These “additional dwellings” will still benefit from the reduction of the normal rate up to £500,000, and will be charged at 3% only. Consideration above this will be charged on the rates as before.

My company buys residential properties, which are then rented out. Will the company benefit from the rate reduction?

Companies will benefit from the rate reduction, but as they also pay the additional 3% on any residential property purchase, the first £500,000 of consideration will be charged at 3% (and not nil). Higher tiered band rates of 8%, 13% and 15% will apply, depending upon the purchase price.

I am taking a lease on a residential property . Does this change effect me or is it just on freehold purchases?

SDLT is charged on any premium paid to enter into a lease in the same way as a freehold purchase, meaning that SDLT for a lease premium under £500,000 will be nil. SDLT is also charged on the net present value (NPV) of the rent due under the lease. Under the old rates SDLT was due on NPV over £125,000 at a flat rate of 1%; from 8 July the threshold has increased to £500,000.

I am buying four properties in one transaction in August. I was advised that multiple dwellings relief could be claimed. Will the new lower rate be available on this purchase?

When two or more dwellings are bought in one transaction, Multiple Dwellings Relief allows the rate of SDLT chargeable to be calculated based on the average price of each dwelling. The extended nil rate band will be available on the purchase of multiple dwellings, however, this is a complex matter and professional advice should be sought.

I exchanged contracts on a property in October. For various reasons I will effectively have full access to the property from December although completion won’t take place until April 2021. Which rate do I use?

The extension of the nil rate will cease on 31 March 2021. It is possible that by having access to the property you will have “substantially performed” the contract before completion and that, in fact, the SDLT will become due when that happens in December. HMRC has confirmed that no extra tax will be due when a contract is completed after 31 March 2021 but where ‘substantial performance’ happened during the temporary relief period. Substantial performance is a complex area and professional advice should be sought.

I am completing on the purchase of a shop in December. Will the SDLT reduction be available on my purchase?

No, the rate reduction applies to residential property purchases only.

The building is a shop unit on the ground floor and a flat on the floor above. The total purchase price is £400,000; I estimate the value of the flat is £180,000. Can I split the SDLT between residential and non residential rates?

No, any single transaction (or a linked transaction) that consists of both residential and non-residential properties is charged at the non residential SDLT rates.

For help and advice in this complex area please get in touch with Fiona Phillips directly at fiona.phillips@andrewjackson.co.uk.

Our friendly team is here to provide support and advice for all legal matters affecting you or your business, so please don’t hesitate to get in touch with us on 01482 325242 or by emailing enquiries@andrewjackson.co.uk

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