As part of the Spring Statement the Chancellor, Rishi Sunak, announced an extension to the current Stamp Duty Land Tax (SDLT) holiday on residential purchases in England and Northern Ireland.
The holiday, which was due to end on the 31st of March 2021, was a significant motivator for buyers to take advantage of this potentially once in a lifetime saving. The Bank of England reported in its November Money and Credit report that mortgage approvals for house purchases were the highest they had been since September 2007.
With transaction times taking up to 20 weeks in some cases, many industry bodies lobbied the government to use a creative approach to ending the holiday so that buyers that had patiently waited for their transaction to complete wouldn’t miss out.
The response was a slightly tapered approach, as illustrated below:
• a £500,000 nil rate band is in place until 30 June 2021 (rather than ending on 31 March 2021)
• a £250,000 nil rate band is in place between 1 July 2021 and 30 September 2021
• the nil rate band will return to the standard amount of £125,000 from 1 October 2021
With regards to first-time buyers’ relief, which has no effect while the nil rate band is £500,000, this will be resumed from 1 July 2021.
What is the current SDLT rate on a residential purchase?
Since the holiday was announced, 8th July 2020, buyers have been able to take advantage of paying 0% stamp duty land tax against house purchases of up to £500,000.
See the below table for what rates apply to each proportion above £500,000.
SDLT from 8 July 2020 to 30 June 2021*
| Property value | SDLT rate |
| Up to £500,000 | Zero |
| The next £425,000 (the portion from £500,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Example: In March 2021 you buy a house for £625,000. The SDLT you owe will be calculated as follows:
• 0% on the first £500,000 = £0
• 5% on the remaining £125,000 = £6,250
• Total SDLT = £6,250
*source: www.gov.uk
What rate will I pay when the tapered system comes into effect?
The staggered end to the current SDLT holiday is broken down as follows.
• 1 July 2021 to 30 September 2021
• 1 October 2021
Rates from 1 July 2021 to 30 September 2021*
| Property value | SDLT rate |
| Up to £250,000 | Zero |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Example: In August 2021 you buy a house for £275,000. The SDLT you owe will be calculated as follows:
• 0% on the first £250,000 = £0
• 5% on the remaining £25,000 = £1,250
• total SDLT = £1,250
*source: www.gov.uk
Rates from 1 October 2021*
These rates also apply if you bought a property before 8 July 2020.
| Property transfer value | SDLT rate |
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Example: In October 2021 you buy a house for £295,000. The SDLT you owe will be calculated as follows:
• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £45,000 = £2,250
• total SDLT = £4,750
*source: www.gov.uk
What do these rules mean for first-time buyers?
While the nil band is in place first-time buyers aren’t eligible for any further tax relief. However, from the 1st of July 2021, the previous discount will come back into effect.
This means you’ll pay:
• no SDLT up to £300,000
• 5% SDLT on the portion from £300,001 to £500,000
You’re eligible if you and anyone else you’re buying with are first-time buyers.
If the price is over £500,000, you follow the rules for people who’ve bought a home before.
For further help, the government has created an online calculator to detail the amount of SDLT you’ll pay whether you’re a first-time buyer, your purchasing a new primary residence, or an additional dwelling etc.
Furthermore, if you’re looking to move or are in the process of buying a property, get in touch today to find out how Enact can smoothly manage your conveyancing transaction on your behalf.
