Government brings in temporary Stamp Duty reductions for property purchasers

The government has reduced rates of Stamp Duty Land Tax (SDLT) for property purchases in England and Northern Ireland. This is a temporary measure and applies to property purchases between July 8th 2020 and March 31st 2021.

What will purchasers pay?

Purchasers completing on a property (a main residence) valued at up to £500,000 will not pay any Stamp Duty.

For properties costing from £500,001 to £925,000, SDLT is 5% of the portion above £500,001.

For properties costing from £925,001 to £1.5 million, SDLT is 10% of the portion above £925,001.

For the remaining amount, the portion above £1.5 million is taxed at 12%.

March 31st deadline for property purchases

This tax cut is a temporary measure, aimed at boosting the UK’s post lockdown property market, and ends on March 31st 2021.

Stamp Duty is payable on completion of a purchase, so if buyers have exchanged contracts but not yet completed, they should do so before March 31st 2021 to take advantage of the tax savings.

This makes it an excellent time to buy property and we currently have a good choice of new-build properties for sale in London under the £500,000 threshold. Do get in touch with us if you would like to receive more information about current properties we have for sale.

Landlords and second home buyers

Existing Landlords and second home buyers will also be eligible for the reduced Stamp Duty tax rates but they will still have to pay the 3% higher rate which applies to the purchase of additional properties.

What are the typical cost savings for property purchasers?

You can find try our useful stamp duty calculator which will work out the saving you’ll make compared to the previous Stamp Duty rate.For example, if you bought an apartment as a main residence or buy-to-let investment and had paid £390,000 before the Stamp Duty holiday, you would have paid £9,500 in Stamp Duty.Now, the Stamp Duty is nil so you save £9,500.

£300,000 Purchase Price – before changes

Tax band Taxable amount Tax rate Stamp duty
0 – £125,000 £125,000.00 3% £3,750.00
£125,000 – £250,000 £125,000.00 5% £6,250.00
£250,000 – £925,000 £50,000.00 8% £4,000.00
£925,000 – £1,500,000 £0.00 13% £0.00
£1,500,000+ £0.00 15% £0.00
Total £300,000.00 £14,000.00

£300,000 Purchase Price – after changes (Saving – £5,000)

Tax band Taxable amount Tax rate Stamp duty
0 – £500,000 £300,000.00 3% £9,000.00
£500,000 – £925,000 £0.00 8% £0.00
£925,000 – £1,500,000 £0.00 13% £0.00
£1,500,000+ £0.00 15% £0.00
Total £300,000.00 £9,000.00

£500,000 Purchase Price – before changes

Tax band Taxable amount Tax rate Stamp duty
0 – £125,000 £125,000.00 3% £3,750.00
£125,000 – £250,000 £125,000.00 5% £6,250.00
£250,000 – £925,000 £250,000.00 8% £20,000.00
£925,000 – £1,500,000 £0.00 13% £0.00
£1,500,000+ £0.00 15% £0.00
Total £500,000.00 £30,000.00

£500,000 Purchase Price – after changes (Saving – £15,000)

Tax band Taxable amount Tax rate Stamp duty
0 – £500,000 £500,000.00 3% £15,000.00
£500,000 – £925,000 £0.00 8% £0.00
£925,000 – £1,500,000 £0.00 13% £0.00
£1,500,000+ £0.00 15% £0.00
Total £500,000.00 £15,000.00

Is it a good time to buy an investment property in London?

Yes, now is a good time to invest. All the key indicators that underpin the UK housing market are showing a strong bounce back after lock-down. The weak pound, ultra-low interest rates, a well-supported economy all make bricks and mortar is a less volatile asset. There are some very good deals being offered by UK developers and buyers can use their power to negotiate a good deal particularly for properties completing before the March 2021 stamp-duty break is removed.

Further guidance

For more information on UK property taxes, we have produced a helpful Tax Guide for Overseas Investors. We also offer a Tax Return service for our overseas clients.

For more information about how we can help you add value to your London rental investment, or for tips on tax efficiency, email us and we will be delighted to assist you.

If you are an overseas landlord, we also have international offices in China, Hong Kong, India, Malaysia and Singapore who will be able to help you further.

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About the Author

Vidhur studied Management Sciences at Manchester University, focusing on accountancy, before going on to qualify as a chartered accountant. He began his career working in investment banking but after several years decided to join Benham and Reeves in 2003. Since then he has expanded the finance department, introducing a broader range of services to encompass all financial aspects of property investment, from collecting rent through to completing tax returns (or ATED returns for overseas companies). Read more about Vidhur Mehra here - Read full profile

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