COVID-19 and SDLT – it may not all be doom and gloom

COVID-19 and SDLT – it may not all be doom and gloom

Just how much SDLT might you pay on your dream house in the country from which to shelter from COVID-lockdown 3, 4 or n-squared?

Well, if you buy quickly (i.e. before 31 March 2021) then assuming your dream home costs £500,000 or more, you will be making a saving of £15,000. In our opinion, this SDLT fillip, together with the "race for space", has resulted in the market being quite frothy and this is likely to remain the case during COVID-lockdown Mk II. The Office for National Statistics noted in August 2020 that the average price of property in England had increased by 2.8% although of course, this belies regional variations and price differentials.

Chris Druce, a Senior Research Analyst at Knight Frank, comments, “Worcester is an example of somewhere that offers both greenery and space that hasn’t traditionally been considered an easy location to commute full-time from. Following lockdown and the adoption of WFH [working from home] widely, this perception and indeed people’s requirements have changed.”

Similarly, we have seen many people wanting to buy in that £3 million to £4 million price range where it may be possible to have room for the swimming pool, tennis court or paddock. Extra space may also allow for commercial use of part of the land or have the advantage of subsidiary dwellings already established on the land. Either of these could have a significant bearing on your actual SDLT liability as you might, for example, access the favourable 5% SDLT rate for a mixed-use purchase or use multiple dwelling relief to pay SDLT by reference to the average price of the dwellings.

That said, any purchaser needs to consider carefully whether they are paying SDLT at the normal SDLT rates that currently reach 12% for purchases over £1.5 million or at the higher rates for additional dwellings, which add a 3% surcharge on to each SDLT band, resulting in a top rate of 15%. Many factors play a part in determining which SDLT rate regime you are in, but not least whether your purchase is your forever dream home in the country (accompanied by a sale of your city apartment) or simply a weekend bolt-hole with your centre of life remaining elsewhere.

Also, there are many reasons why you might not be able to purchase by 31 March 2021. A buyer should therefore be mindful that it is currently anticipated that from 1 April 2021, both the COVID temporary SDLT rules will be removed and non-resident SDLT (NRSDLT) will be as follows:

Purchase Price Ordinary SDLT Ordinary SDLT + 3% Higher Rates COVID SDLT COVID SDLT + 3% Higher Rates Ordinary SDLT + Non Resident Surcharge Ordinary SDLT + 3% Higher Rates + Non Resident Surcharge
    500,000
    15,000
    30,000
    0
    15,000
    25,000
    40,000
    750,000
    27,500
    50,000
    12,500
    35,000
    42,500
    65,000
    1,000,000
    43,750
    73,750
    28,750
    58,750
    63,750
    93,750
    1,500,000
    93,750
    138,750
    78,750
    123,750
    123,750
    168,750
    2,500,000
    213,750
    288,750
    198,750
    273,750
    263,750
    338,750
    5,000,000
    513,750
    663,750
    498,750
    648,750
    613,750
    763,750
    10,000,000
    1,113,750
    1,413,750
    1,098,750
    1,398,750
    1,313,750
    1,613,750

Elizabeth Small is a Partner in the Tax team.


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