STAMP DUTY LAND TAX REDUCTION Q&A

In his July statement, the Chancellor announced a reduction in the Stamp Duty Land Tax (SDLT) payable on residential purchases by increasing the ‘zero’ residential rate to £500,000 from its present £125,000. Here SDLT specialist Fiona Phillips of Andrew Jackson Solicitors LLP answers some questions regarding this temporary rate change.

Q. I exchanged contracts on 7 July to buy a property for £450,000, although completion won’t take place until mid August. Which rate am I paying?
A. The good news is that SDLT is calculated using the rates in force on the date of completion so a property purchase in August will be at the new rate. If the property is your only residential property, or the replacement of your main residence, then SDLT will be nil as it is below the £500,000 threshold. 

Q. I have had an offer of £800,000 accepted on a main residence. The agent told me to budget for SDLT of £300,000, based on old rates. As my purchase will take place after 8 July, what will my saving be?
A. As there is now no SDLT on the first £500,000 of consideration, the SDLT will be due only on £300,000 and will be £15,000.

Q. In order to enjoy ‘staycations’ in the future I am going to buy a holiday home in England. I know that second homes are charged at a higher rate – will this purchase benefit from the rate change?
A. Second homes, buy to lets and holiday properties are all charged at the normal rate plus a 3% surcharge. These ‘additional dwellings’ will still benefit from the reduction of the rate up to £500,000, which will be charged at 3% only. Consideration above this will be charged on the rates as before.

Q. My company owns residential properties which are rented out. Will the company benefit from the rate reduction? 
A. Companies will benefit from the rate reduction, but as they also pay the additional 3% on any residential property purchase the first £500,000 of consideration will be charged at 3% (and not nil), with rates of 8%, 13% and 15% above.

Q. I am taking a lease on a residential property. Does this change effect me or is it just on freehold purchases?
A. SDLT is charged on any premium paid to enter into a lease, in the same way as a freehold purchase. Thus for a lease premium under £500,000 the SDLT will be nil. SDLT is also charged on the net present value (NPV) of the rent due under the lease. Under the old rates SDLT was due on NPV over £125,000 at a flat rate of 1%; from 8 July the threshold has increased to £500,000.

Q. I am buying four properties in one transaction in August. I was advised that multiple dwellings relief could be claimed. Will this new lower rate be available on this purchase? 
A. When two or more dwellings are bought in one transaction, Multiple Dwellings Relief allows the rate of SDLT chargeable to be calculated based on the average price of each dwelling. The extended nil rate band will be available on the purchase of multiple dwellings. This is a complex matter and professional advice should be sought.

Q. I am exchanging contracts on a property in October. For various reasons I will effectively have full access to the property from December although completion won’t take place until April 2021. Which rate do I use?
A. The extension of the nil rate will cease on 31 March 2021. It is possible that by having access to the property you will have ‘substantially performed’ the contract before completion and that in fact the SDLT will become due when that happens in December. HMRC have confirmed that no extra tax will be due when a contract is completed after 31 March 2021 but where substantial performance happened during the temporary relief period. Substantial performance is a complex area and professional advice should be sought.

Q. I am completing on the purchase of a shop in late July. Will this effect my purchase?
A. No, the rate reduction applies to residential property purchases only.

Q. Actually the building is a shop unit on the ground floor and a flat on the floor above. The total purchase price is £400,000; I estimate the value of the flat is £180,000. Can I split the SDLT between residential and non residential rates?
A. No, any single transaction (or a linked transaction) that consists of both residential and non-residential properties is charged at the non residential SDLT rates.


Stamp Duty Land Tax is a complex area so if you have any queries or need assistance please contact Fiona by email. Andrew Jackson Solicitors LLP is of course also available to help with any legal matter affecting you or your business, so please don’t hesitate to get in touch on 01482 325242 or at enquiries@andrewjackson.co.uk and their friendly team will be ready to offer you the advice and support you need.