In his Summer Statement the Chancellor announced a temporary reduction in residential stamp duty land tax (SDLT) rates in England and Northern Ireland. The reduction applies to contracts exchanged between 8 July 2020 and 11.59pm, 31 March 2021. It means that the nil-band rate (below which no SDLT is payable) is increased from £125,000 to £500,000. House buyers who do not own other residential property will pay no SDLT on the first SDLT £500,000 of their purchase.
For second-home owners, the surcharge for additional properties is reduced so that for anyone buying a second home the first £500,000 will be chargeable at an SDLT surcharge of 3%, rather than the previous 5%. As a word of caution, please take specialist advice as to whether other SDLT bands or relief may be available when buying a property, particularly in mixed-use rural context.
Since the SDLT holiday was introduced, we’ve seen a large uptake in transactional activity in the residential market. The Government’s own figures point out that residential sales rose 14.5% in July and 15.6% in August. Government thinking behind the SDLT holiday is that it will stimulate other economic activity, for example the purchase of retail, household and DIY goods.
How much the increase in market activity is due to the SDLT holiday or other factors is difficult to assess. SDLT holiday or not, lockdown has led many of us and our clients to reprioritise where and how we live, be that the need for facilities to work from home or the call for more recreational or green space. Whilst the SDLT holiday is a bonus for house buyers, we’re seeing a knock-on impact on prices, with properties frequently being subject to bidding wars or selling over the asking price as demand increases. This means that some of the SDLT savings afforded by the temporary reduction are eaten up by higher purchase prices.
Richard Hughes, Partner, Real Estate
As a word of caution, please take specialist advice as to whether other SDLT bands or relief may be available when buying a property, particularly in mixed-use rural context.
We all hope that coronavirus restrictions will be over by 2021. Even after they end, however, it seems inevitable we won’t return to living and working as we did before, probably with home working to remain much more commonplace. It therefore seems likely to us that the high demand for well-connected rural and suburban family properties may continue even after restrictions on our movement hopefully subside.
