Stamp Duty rundown | 8 July 2020

Further to the news today the Chancellor, Rishi Sunak has implemented an immediate cut in Stamp Duty Land Tax (SDLT) until 31 March 2021 by increasing the threshold to £500,000, it is ideal timing to provide a reminder of SDLT rates plus situations that give rise to potential refunds of the additional 3% rate (read to bottom).

The announcement today provided other details such as a £1,000 incentive to retain a staff member at the end of the furlough scheme along with other news to promote economic recovery.

A reminder of the rates currently:

Residential property

Property or lease premium or transfer valueSDLT rate
Up to £125,000Zero
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%

 

First time buyers can claim a discount (relief) so they do not pay any SDLT up to £300,000 and 5% on the portion from £300,001 to £500,000.

An additional higher rate on top of 3 per cent is applied to those purchasing a second property (this is also payable by companies).

Companies 

Apart from the higher rate if companies buy properties valued over £500,000 there is a SDLT charge of 15 per cent plus possibly and annual tax charge (Annual Tax on Enveloped Dwellings – ATED)

Planning points:

  • Use of companies to purchase residential property can be favourable as although additional SDLT still applies there is relief for mortgage interest (restricted for tax relief for an individual). Plus lower rate of corporation tax vs higher rates of income tax.
  • The higher rate does not apply to commercial property
  • You may lend money to family members (eg. children) to purchase a property

 

Sold recently or planning to sell a buy to let? – Important change: From 6 April 2020, if you’re a UK resident and sell a residential property in the UK you’ll have 30 days to tell HMRC and pay any Capital Gains Tax owed. make sure you advise your tax adviser immediately rather than when your tax return is due as there are also penalties for late payment…..

 

Could you be due a SDLT refund?

  1. If you purchased a second property whilst before the sale of your previous main home and had to pay the additional 3 per cent – you may have up to 3 years later to claim this back (or longer than 3 years subject to certain conditions).
  2. A late 2019 tribunal case vs HMRC ruled that the higher rate stamp duty does not apply to the purchase of a buy to let property that is too dilapidated to be considered a dwelling. if you purchased a derelict /run down property, which you then fully refurbished in order to let, you may have been overcharged SDLT.

We are more than happy to discuss your particular scenario with you in detail.

 

This information is correct as at 8 July 2020.

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