SDLT changes and additional surcharges

SDLT changes and additional surcharges – Is it now or never?

Today the Chancellor announced that the Stamp Duty Land Tax (SDLT) holiday will be extended until 30 June 2021. For those seeking to benefit from this, May could be argued to be the final month in which consumers can feasibly initiate a property purchase.

The extension means that if you purchase a residential property between 8 July 2020 to 30 June 2021 and qualify for the lower rates of SDLT, you only start to pay SDLT on the amount that you pay for the property above £500,000.

Furthermore, the Chancellor has also announced SDLT relief for a further three-month period. Providing you qualify for the lower SDLT rates, from 1 July 2021 until 30 September 2021, buyers will only start paying SDLT on a property valued above £250,000.

In a recent article for the FT Adviser, Lucy explains how the latest SDLT changes have increased activity in the residential property market, with many consumers eager to take advantage of the more desirable SDLT rates. However, she also highlights that due to unforeseen delays, the inundated market and the short SDLT holiday, many purchasers are at risk of not achieving completion prior to the deadline.

With this in mind, Lucy advises buyers to do the following:

  • Seek the assistance of mortgage brokers.
  • Avoid an agreement whereby competition falls close to the deadline.
  • Ensure there is a safeguard clause within their contracts that would guarantee the seller adopts the responsibility of paying additional SDLT charges or perhaps shares them.

Changes to SDLT rates from 1 October 2021 for UK residents

The 1 October 2021 will officially mark then end to all forms of SDLT relief. SDLT rates will therefore revert to those present as of 7 July 2020 and are as follows:

Property Value SDLT rate
£0 - £125,000
£125,001 – £250,000
£250,001 – £925,000
£925,001 – £1.5 million
Over £1.5 million

Changes to SDLT rates from 1 April 2021 for non-UK residents

From 1 April 2021, non-UK residents will have to pay a 2% surcharge on the purchase price of any residential property purchase, meaning the SDLT rate will be two percentage points higher than rates that apply to purchases made by UK residents.

Non-UK resident purchasers will therefore be paying 17% SDLT on the part of any purchase price above £1.5 million, as well as 2% more on every SDLT band. It is anticipated that this will have a significant affect on the residential property market and will likely increase the property transactions between now and April as non-UK residents rush to purchase properties before the surcharge comes in.

To be resident in the UK for SDLT purposes, you have to:

  • You must have been in the UK for at least 183 days in the 365-day period preceding the purchase.
  • You must be married to a UK resident and jointly purchase the property.

It is important to note that purchasers will also have the ability to reclaim the surcharge paid on completion should they meet the residence test within two years of the date of the purchase.

The surcharge will also catch companies and unit trusts established and managed outside the UK and a UK tax resident company will still have to pay the surcharge if the company is controlled by non-UK residents.

For non-UK residents looking to invest in UK property, please contact Lucy Barber, Head of our Residential Property team, for further guidance.

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