On 8 July 2020, the Chancellor of the Exchequer announced a temporary reduction to stamp duty land tax (SDLT) rates as a result of coronavirus (COVID-19), to take effect immediately and remain in force until 31 March 2021.
[Updated on 24 July.]
Transaction volumes were significantly down during lockdown and June saw negative annual house price growth for the first time since 2012.
The market has since changed.
The temporary SDLT cut works by raising the standard residential property value threshold at which SDLT begins to be paid from £125,000 to £500,000.
This means that 0% is charged on the first £500,000. For properties purchased for more than that threshold, the previous rates continue to apply to the excess above £500,000.
HMRC has produced guidance on the temporarily reduced rates.
When do the temporary rates apply?
These reduced rates apply to transactions that are completed or substantially performed between 8 July 2020 and 31 March 2021 inclusive.
The temporary rates do not apply where the transaction was completed or substantially performed before 8 July 2020.
By way of reminder, a base figure of £40,000 is a condition for the 3% charge applying. If the chargeable consideration is:
- less than £40,000, the 3% additional charge does not apply, and the transaction is not notifiable
- over £40,000, it applies to the whole consideration (where the other conditions to its application are met).
The higher rates of SDLT for additional dwellings (second homes) are 3% more than the standard residential property rates of SDLT applied to the whole consideration (both before and after 8 July).
After 8 July, the SDLT higher rates are reduced by an amount corresponding to the reduction in the standard rates. This works, in effect, by applying the 3% SDLT surcharge for purchases of second homes to the whole consideration – on top of the temporarily reduced standard rates.
The result is that a rate of 3% is applicable after 8 July to the whole of the first £500,000 for purchases of second homes (and 8% between £500,000 and £925,000, and so on). (Compare that with higher rates of SDLT before 8 July that resulted in a rate of 3% under £125,000, 5% between £125,000 and £250,000, and so on.)