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SDLT Update: Temporary Reduced Rates for Residential Property Purchases Extended

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On 3 March 2021, Rishi Sunak confirmed that his popular “SDLT holiday” of reduced SDLT rates for the purchase of residential properties in England and Northern Ireland will be extended to transactions with an effective date on or before 30 June 2021. This is an extension of the original qualifying period up to 31 March 2021, which was announced last July and provides for a maximum tax saving of £15,000.

In order to avoid a “cliff edge” cut-off date, purchases of residential property with an effective date between 1 July 2021 to 30 September 2021 will enjoy a smaller reduction – an “SDLT mini-break” of sorts, as the maximum tax saving will be £2,500.

The rates will return to normal on 1 October 2021.

Full details are yet to be published but we set out our initial understanding of these changes. The reduced SDLT rates for the purchase of residential property by UK individuals are as follows:

For the period to 30 June 2021:

 

For the period from 1 July 2021 to 30 September 2021:

 

For the period 1 October 2021 onwards, the usual rates return:

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Separate tax regimes apply in respect of properties purchased in Wales and Scotland.

The rates for the acquisition of commercial and mixed-use property have not changed.

What about purchases by companies or non-residents, or buyers of second homes?

The reduced rates will also benefit companies when buying residential property, however the 3% surcharge rate for purchases of residential properties by a company, or buyers of second homes will still apply on top of the rates shown above.

Similarly, for non-resident purchasers of residential property, we expect the 2% surcharge will apply on top of these rates (and on top of the 3% surcharge, if applicable).

What if contracts will be exchanged during one of the qualifying periods but completion is expected after those periods?

The reduced rates will not apply to a transaction if completion takes place after the qualifying periods, unless the date of ‘substantial performance’ falls within the qualifying periods. Speak to your conveyancer if you think legal completion may take place after the qualifying periods.

Is there anything else that should be considered?

Remember, even if the reduced rates apply, in most cases there is still a requirement to send an SDLT return to HMRC and pay any tax due within 14 days of completion. HMRC may charge you penalties and interest if you do not take both of these steps.

Please get in touch with us if you would like further guidance.

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