If you have been looking into the property market in the UK, you have probably heard of SDLT, which stands for Stamp Duty Land Tax. Stamp Duty Land Tax is tax buyers pay when they purchase a property or land in England and Northern Ireland. The tax is applicable for freehold property, new or existing leasehold, transferred land or properties as a method of payment, and for properties bought through shared ownership schemes.
How does it work? Essentially, after you buy a property in the UK, you’ll have 14 days to make your Stamp Duty payment – you had 30 days after purchase before March 2019. SDLT is a progressive system with rate increases applied between stamp duty thresholds, not to the final purchase price since the the old system was replaced in 2014.
As a response to COVID-19 pandemic, the government decided to support the local housing market in the UK by providing relief related to property transactions. Therefore in July 2020, official Stamp Duty Holiday was announced and it will be valid until April 2021. If you are planning to invest in the UK, it will be good to know that the initial threshold for property buyers has increased from £125k to £500k, excluding a large number of purchases in this period.
New Stamp Duty Land Tax rates
What do you need to know about the Stamp Duty holiday?
1. Stamp duty holiday is valid until 31st March 2021. If you are planning to purchase a property in the UK, you better complete the transaction before 31st March 2021.
2. Overseas buyers, including British Expats, will pay an additional 2% in stamp duty for property purchases in the UK.
3. The initial threshold for property purchases has risen from £125,000 to £500,000.
4. The first time buyers purchasing a property under £500,000 will not pay any stamp duty – which means a majority of buyers will not pay anything.
5. A surcharge of 3% is included for additional property purchases, including second homes, and buy to let investments. However, if the additional property is purchased for less than £40k, the SDLT rate will be 0%. The SDLT rate for all purchases from £40k to £500k is 3% charged on the full purchase price.
6. Normal SDLT rates will be applied for buyers that are replacing their home – if you sell your old house immediately, or shortly after. If the previous some is not sold immediately, you will have to pay for a stamp duty calculated at the higher rate and may claim the refund at a later stage. The refund can be requested up to 12 months after the last house is sold, in case the home is sold up to 3 years after purchasing the new one. Any delays due to COVID-19 or other exceptional circumstances can extend this 3-year threshold.
Overseas buyers will pay more from April 2021
As mentioned earlier, non-UK buyers will pay a further 2% tax in addition to the existing 3% charge on additional property purchases.
This additional tax will apply to anyone who is not a tax resident in the UK, including British Expats working and living abroad. What does it mean in practice? If you purchase a property for £130,00 before 31 March 2021, you will pay £3,900 in Stamp Duty charges, and £6,600 after 1 April 2021. Nice savings! If you are reading this blog, I assume you want to learn more about Stamp Duty Land Tax and how it applies to your next property purchase. In that case, we recommend that you speak with one of our investment consultants or visit the stamp duty calculator page to calculate your charges.