England and Northern Ireland
Stamp Duty Land Tax (or as it’s more commonly known, Stamp Duty), is being temporarily cut in England and Northern Ireland. From 8 July 2020 until 31 March 2021, it will generally only be charged on residential properties costing £500,000 or more.
Previously, Stamp Duty began to be charged on residential properties costing £125,000 or more, except for first-time buyers, who paid nothing up to £300,000 and then a reduced rate up to £500,000, and purchases of additional homes (more below).
Effectively, this tax cut will benefit first-time buyers looking for property over £300,000, and other buyers purchasing homes over £125,000.
Those buying an “additional property”, such as a buy-to-let or a second home, will also benefit from the cut. However, they will still have to pay at a rate 3% higher than those who do not fall into those rules, so they are unlikely to fall outside the tax entirely as a result of the change. Click HERE to see the new rates at a glance.
Research suggests the average price paid by a first-time buyer in England and NI is in the region of £230,000, so the average first-time buyer would not benefit from the changes. That said, the Chancellor reckons 9 out of 10 house purchases in England and NI will now be taken outside the Stamp Duty net altogether, which is an impressive figure!
Initial feedback on the announcement is that this will hopefully speed up the inevitable slowdown in the housing market that COVID-19 has caused. However, some commentators have suggested that all this will do is accelerate purchases that were being planned for next year and will lead to a property demand slump in 2021 when the reduction is over. It remains to be seen if this is enough to reverse the fall in house prices that we’ve seen over the last quarter.
In a move that echoes Rishi Sunak’s announcements on Stamp Duty, Revenue Scotland has announced that the nil rate band for starting to pay Land and Buildings Transaction Tax (“LBTT”) on residential property purchases will be increased from £145,000 to £250,000.
Since 2015, Scotland has had its own property transaction tax, LBTT, which is administered by Revenue Scotland, the Scottish equivalent of HMRC.
Unlike in England and NI, the change to the nil rate threshold for LBTT didn’t come into force immediately, but it has since been confirmed it will apply to all purchases with an effective date of 15 July 2020 onwards. Once introduced, the change will remain in place until 31 March 2021, and it is thought that 8 out of 10 house purchases in Scotland will be raised out of the tax during that time.
The changes do not affect the Additional Dwelling Supplement (ADS) which requires that further LBTT is paid, in addition to the standard amount, calculated based on 4% of the entire purchase price. Click HERE to see Revenue Scotland’s guidance on the new rates.
Finally, slowest off the blocks but not too far behind, the Welsh Government has confirmed that they too will be raising their starting threshold for Land Transaction Tax (“LTT”) from £180,000 to £250,000. This change is effective from 27 July 2020, and will be in place until 31 March 2021.
Unlike in England and NI, these changes will not assist those purchasing an additional dwelling; the higher rates applicable to these types of transactions (i.e. 3% higher than “standard rates”) are entirely unchanged, with the Welsh Government saying they are specifically targeting this tax support at those buying their own homes.