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Changes to SDLT – a Tax Planning Opportunity

There’s some good news for those looking to buy property, with Stamp Duty Land Tax (SDLT) changes announced by Chancellor Rishi Sunak in his recent Summer Statement. The news will benefit buy-to-let and second home property investors, along with homeowners purchasing a new private residence and possibly those who wish to transfer property to a limited company.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

SDLT update

From 8 July 2020 until 31 March 2021 there will be, what the chancellor has called, an SDLT holiday.

This means that for all purchases completed during this timeframe, the SDLT threshold will increase from £125,000 to £500,000 in England and Northern Ireland, with different rates applied in Scotland and Wales.

This move comes as a surprise after all the legislation and bureaucratic roadblocks the buy-to-let market has faced in recent years but has undoubtedly been introduced to help the market stay afloat while the world is still dealing with the economic effects of the coronavirus pandemic.

What changes for first-time buyers?

Previously, all first-time homebuyers were exempt from paying SDLT on property purchases of up to £300,000. However, under the new rules, this increases to £500,000 in line with all home buyers. It does however, mean that if they purchase a home over £500,000, they will be responsible for paying the same tax rate as any other buyer.

How much could you save?

With the SDLT holiday, someone purchasing a £500,000 house could save £15,000.

On average, homebuyers could potentially save 22%, or £1,840, depending on the price of the home. In London and other areas where the cost of properties is higher, such as the southeast, the average stamp duty bill would decrease by 26% or £7,240.

The SDLT holiday does not just pertain to homes intended to serve as residences, but all properties. So while buyers purchasing a second property will still need to contend with the 3% surcharge on second homes or buy-to-let properties, any stamp duty that previously would have been applied to properties up to £500,000 is no longer relevant – for the time being, anyway.

Additional benefits

If you’re a buy-to-let investor and have been wanting to move your property in to a limited company, now might be the time to do it. The 3% surcharge remains, but the SDLT on properties over £40,000 (up to £500,000) does not currently apply.

Just because this new opportunity has arisen to avoid the 3% SDLT rate, it does not mean that capital gains tax rules have disappeared though, so keep that in mind — along with any mortgages on the property — when considering the move.

Strike while the iron’s hot

If you’re in the market for a new property, be it your first, second, or yet another one in your portfolio, or if you’ve been thinking about moving a property to your limited company, this Stamp Duty Land Tax holiday could be highly beneficial.

Be sure to speak to a financial adviser when considering important financial decisions, especially during tough economic times. We’re here to help you with your tax and financial planning needs and can advise on the best way to take advantage of this temporary SDLT reprieve. Get in touch with us to get started.

Is now the right time for you to purchase property?
Investments | Financial Planning | Retirement | Save Tax | Protection |

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