09 July 2020

Temporary Reduction in UK Stamp Duty Land Tax

The UK’s Chancellor announced on 8 July 2020 a string of measures aimed at kick starting the UK economy following the coronavirus crisis and temporarily reducing certain taxes, including, VAT for tourism businesses and stamp duty land tax (SDLT).

SDLT is a transfer tax for buyers on the acquisition of property interests in England or Northern Ireland.  SDLT on residential property is charged at different rates depending on whether the buyer (wherever resident) is, broadly:

  1. a first-time buyer or individual without a second home anywhere in the world;

  2. a “non-natural person” (such as, a company or partnership) or an individual with a second home – these are “higher rates transactions” where a 3% SDLT surcharge may arise; or

  3. a non-natural person where the consideration is more than £500,000 and an exclusion (such as, in relation to qualifying property rental businesses) does not apply – in these cases, a flat rate of 15% SDLT arises on the consideration.

A temporary reduction in SDLT has been announced with effect from now until 31 March 2021 in relation to residential transactions only (lower rates of SDLT apply to non-residential or mixed-use properties).  Under the new rules, the following amounts of SDLT may be saved for the next 9 months for the above categories of residential property buyer:

  1. no SDLT on first £500,000 of consideration, saving up to £10,000 SDLT (for first time buyers) or £15,000 for others; 

  2. 3% SDLT on first £500,000 of consideration, saving up to £15,000 SDLT (which would otherwise have been £30,000 on £500,000); and

  3. no SDLT saving, as the flat rate of 15% SDLT applies where the consideration is over £500,000.

This £15,000 saving would be a substantial reduction in SDLT for many buyers of UK residential property.  

Overseas investors in residential real estate in England and Northern Ireland should consider investing prior to April 2021 in order to benefit from the currently lower SDLT rates.  From 1 April 2021 an additional 2% surcharge in SDLT for non-resident buyers will arise which would be, where relevant, on top of the existing 3% SDLT surcharge and 15% flat rate outlined above.  

We have already seen increased demand from Asian investors looking to acquire residential real estate in London.  If you have any queries in this regard, please do not hesitate to contact John Danahy (Real Estate Partner) or Sam Coleman (Tax Partner) in our London office. 

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