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Temporary Changes Affecting House Purchase in the UK

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%
£0 – £125,000
2%
£125,001 – £250,000
5%
£250,001 – £925,000
10%
£925,001 – £1,500,000
12%
£1,500,001+
15%
Over £500,000 (purchased by certain non-natural persons including companies and collective investment schemes).

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%
£0 – £145,000
2%
£145,001 – £250,000
5%
£250,001 – £325,000
10%
£325,001 – £750,000
12%
£750,001+
A detailed look at the temporary changes announced in July, which were designed to incentivise the property market to move. These affected the various types of tax paid on house purchases. Click To Tweet

 

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%
£0 – £180,000
3.5%
£180,001 – £250,000
5%
£250,001 – £400,000
7.5%
£400,001 – £750,000
10%
£750,001 up to £1.5m
12%
Over £1.5m

Grab the resources you need!

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Alternatively, you can download taster resources for AF1, AF4, AF5, CF1, R01, R02, or R06 if you’re revising for any of those exams.