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Markel Tax

14 Jul 2020

SDLT changes explained

The government announced in the Chancellor’s summer economic update a temporary cut in SDLT for home buyers across England and Northern Ireland, to run from 8 July 2020 to 31 March 2021.

The headline grabbing news was that the nil rate band was being extended from £125,000 to £500,000 and that purchases for less than £500,000 would not be subject to an SDLT charge.

The £125,000 nil rate band applies only to purchases of residential property where the purchaser (or their spouse or fellow joint purchasers) is an individual and does not own any other property or is replacing their main residence.

Purchases of non-residential property are not affected by the temporary change and remain subject to an SDLT charge where the consideration exceeds the separate £150,000 nil rate band. This will apply to mixed use properties and linked residential and non-residential purchases.

Purchases of additional residential property by individuals, and any purchase of residential property by companies, are subject to an additional 3% surcharge on top of the standard rates. As a result, there is no nil rate band to extend, but the HMRC manuals have been updated to indicate that the 3% rate band will also be extended from £125,000 to £500,000 for such purchases.

These changes will reduce the SDLT payable on residential property purchases in England and Northern Ireland, although not all purchases below £500,000 will result in a nil SDLT liability, and it remains to be seen whether Scotland and Wales will follow suit.

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