Temporary Changes Affecting House Purchase in the UK
COVID-19 has brought many changes and challenges to our lives, with the government responding in various ways to support the economy. Temporary changes announced in July, designed to incentivise the property market to move, affected the various types of tax paid on house purchases. In this article, we look at the detail – of interest to those studying for any of the CII AF1, AF4, AF5, CF1, R01, R02, R03, or R06 exams.
Stamp Duty Land Tax (SDLT) is paid in England and Northern Ireland
- Reduced rates of SDLT apply for residential purchases from 8 July 2020 until 31 March 2021.
- They apply whether it is a first home or property has been owned before.
- Up to £500,000 the rate is zero; the next £425,000 (the portion from £500,001 to £925,000) is charged at 5% and the next £575,000 (portion from £925,001 to £1.5m) is charged at 10%; the remaining amount (the portion above £1.5m) is charged at 12%.
- During this temporary period, special rules for first-time buyers are replaced by the reduced rates.
- The 3% surcharge for second properties apply on top of the revised standard rates for the temporary period.
On 1 April 2021, the standard rates revert to:
Rate | Slice of Residential Property Value |
|
|---|---|---|
| 0% | ||
| 2% | ||
| 5% | ||
| 10% | ||
| 12% | ||
| 15% | ||
Land and Buildings Transaction Tax (LBTT) is paid in Scotland
- Temporary changes to LBTT are also in place from 15 July 2020 to 31 March 2021.
- The nil LBTT threshold has been raised from £145,000 to £250,000.
- Up to £250,000 the rate is zero; from £250,001 to £325,000 the rate is 5% and from £325,001 to £750,000 the rate is 10%; the remaining amount over £750,000 is charged at 12%.
- During this period first-time buyers will only pay LBTT on properties over £250,000.
- The Additional Dwelling Supplement of 4% still applies on transactions during this period.
The rates will revert to the following from 1 April 2021:
Rate | Slice of Residential Property Value |
|
|---|---|---|
| 0% | ||
| 2% | ||
| 5% | ||
| 10% | ||
| 12% | ||
Land Transaction Tax (LTT) is paid in Wales
- Temporary changes to LTT are also in place from 27 July 2020 to 31 March 2021.
- The nil LBTT threshold has been raised to £250,000 i.e. up to £250,000 the rate is zero.
- The increase in threshold does not apply to the purchase of additional residential properties where existing bands will apply as well as the 3% surcharge.
The rates will revert to the following from 1 April 2021:
Rate | Slice of Residential Property Value |
|
|---|---|---|
| 0% | ||
| 3.5% | ||
| 5% | ||
| 7.5% | ||
| 10% | ||
| 12% | ||
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