Temporary stamp duty land tax holiday: what you need to know

Published on
2 min read

The Government’s temporary “SDLT holiday” decreases the SDLT cost when you buy a residential property in England and Northern Ireland in the period from 8 July 2020 to 31 March 2021. However, buying a second residential property (other than in some cases where it is a replacement for your home) is still subject to a 3% surcharge on the whole purchase price, and the change doesn’t affect company buyers subject to the special 15% flat rate of SDLT.

What the change means

The Government has granted an “SDLT holiday” for purchases from 8 July 2020 to 31 March 2021.

The change works by increasing the SDLT nil rate band for purchases of residential property from £125,000 to £500,000 for that “holiday” period. It also increases the SDLT nil rate band for grants of residential leases to £500,000.

In most cases the increased rates will apply to transactions which complete or are substantially performed during the period, but not to transactions which had already completed or substantially performed before 8 July. “Substantial performance” means, very broadly, the soonest to occur out of the occupation of the premises, the payment of c90%+ of the consideration, or (if relevant) the first payment of rent.

It overrides First Time Buyer’s relief (since the holiday is effectively a larger and less targeted SDLT relief).

What the change doesn’t mean – pitfalls

The 3% Higher Rate for Additional Dwellings (often known as the 3% surcharge) applies on top of the normal rate bands. So buy-to-let purchases will still incur SDLT, though generally less than before the holiday.

If (broadly speaking) a company buys UK residential property with a value in excess of £500,000, it can be subject to a 15% flat rate (and subsequently to an annual “ATED” charge) unless an exemption applies, under measures introduced to combat inheritance tax avoidance. This 15% rate isn’t affected by the SDLT holiday.

Land Transaction Tax (LTT), which is charged instead of SDLT for purchase in Wales, is not affected. However the Welsh Government have announced their own similar (but far from identical) measure taking affect from 27 July – more details can be found here.

Similarly, Land and Buildings Transaction Tax (LBTT) rather than SDLT is charged for purchases in Scotland, although the Scottish Government has announced a temporary “LBTT holiday” – see here.

Further questions?

HMRC have published guidance on the scheme here.

Our experienced real estate tax team can assist with any more complex questions on these changes.

Mills & Reeve Sites navigation
A tabbed collection of Mills & Reeve sites.
Sites
My Mills & Reeve navigation
Subscribe to, or manage your My Mills & Reeve account.
My M&R

Visitors

Register for My M&R to stay up-to-date with legal news and events, create brochures and bookmark pages.

Existing clients

Log in to your client extranet for free matter information, know-how and documents.

Staff

Mills & Reeve system for employees.