The ending of the only holiday that some of us had in 2020 – the Stamp Duty holiday ends on 31.3.21

In July, the Chancellor announced the suspension of stamp duty land tax (SDLT) on the first £500,000 in England and £250,000 in Wales on any residential purchase as a way of kick starting economic activity. The SDLT holiday, combined with pent up demand following the easing of COVID-19 restrictions, has seen a surge in sales.

But the clock is ticking, and the current reduced SDLT tax rates will only continue to apply to a purchase of an English residential property which completes by 31st March 2021.

In effect, currently, a purchaser only pays SDLT on purchases above £500,000.
The temporary rates are:
Rates from 8 July 2020 to 31 March 2021
Tax Band Tax Rates
Up to £500,000 Zero
The next £425,000 (the portion from £500,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%

There have also been substantial savings made on properties over £500,000 i.e., the SDLT holiday rates mean that the maximum saving can be as much as £15,000 per residential property for a price of over £500,000.

Buyers of second homes have also been able to benefit from the stamp duty holiday, although the existing additional rate of 3% continues to apply on top of the revised ordinary rates. By way of a reminder, the higher rates of SDLT apply to purchases of residential property in England at a time when you already own another residential property (anywhere in the world), and the property you are purchasing is not replacing your only or main residence.

What does the future hold?

The Treasury have indicated that they will not be extending the stamp duty holiday but there have been plenty of other U-turns this year so let’s wait and see. Currently, from the 1st April 2021 the reduced rates will revert to the standard rates of SDLT that were in place prior to 8 July 2020, as follows:
Rates from 1 April 2021
Tax Band Tax Rates
Up to £125,000 Zero
The next £125,000 (the portion from £125,001 to £250,000) 2%
The next £675,000 (the portion from £250,001 to £925,000) 5%
The next £575,000 (the portion from £925,001 to £1.5 million) 10%
The remaining amount (the portion above £1.5 million) 12%

You can find out more on stamp duty rates on the government’s official website here – https://www.gov.uk/stamp-duty-land-tax/residential-property-rates.

In addition to the Chancellor reverting to the original pre-holiday SDLT rates, the Finance Bill 2021 will include legislation introducing a 2% surcharge on non-UK resident transactions. The aim is to help control house price inflation and make housing more affordable for UK residents. This will apply to transactions with an effective date on or after 1 April 2021 (subject to transitional provisions). The 2% surcharge will also apply to British expats working and living overseas.
Furthermore, any overseas buyers who already own a home in England will pay the new 2% surcharge in addition to the existing 3% charge levied on additional property purchases (as aforementioned).
Buyers should secure legally binding completion dates under contracts to ensure completion occurs in good time and before 31st March. It is important to note that the date of the exchange of contracts is irrelevant as the SDLT holiday rates only apply to transactions which legally complete by the 31st March 2021.
With average transaction times increasing, due to increased workloads, it is vital for prospective purchasers to ensure they are in a good position regarding having finance in place, the availability of a deposit, checking the position of any chain of properties involved and if they are also selling, it may be advisable to sell ahead of the purchase, to minimise the risk of a chain breaking down at the last minute.
It is also worth pointing out for those unlucky sellers who are contractually bound to complete before the end of March but fail to do so causing their purchaser to miss the SDLT holiday rate savings, they can expect to have to compensate the purchaser under the contract where a default has occurred. Unfortunately, it is almost inevitable that some will miss the deadline.

For further information please contact our Conveyancing Department on 0121-233-6912.