On Wednesday 8 July, Chancellor Rishi Sunak presented his Summer Statement, which was all about bringing the economy back to life with a plethora of positive new measures. Among the initiatives introduced was the very welcome temporary cut to stamp duty land tax (SDLT) on residential property purchases.
The temporary reduction applies to transactions from 8 July 2020 up until the 31 March 2021 and will give the property and construction industry the welcome boost it so desperately needs. Chancellor Sunak suggested this move means that nearly 9 out 10 people buying a home this year will pay no SDLT at all.
Julia Rosenbloom, Tax Partner at Smith & Williamson in Birmingham, comments:
“This is great news for the housing industry and applies to all purchasers. Whether you’re moving home or you’re a property investor, you can benefit significantly from the tax savings. The idea is to stimulate the market and bring it back to life.”
The nil rate band for SDLT on residential properties has been increased from £125,000 to £500,000. Prior to the announcement, the portion of the property price between £125,000 and £500,000 had been subject to SDLT at between 2% and 5%. While the additional 3% SDLT charge for second properties remains, the reduction to the main rate still provides a significant SDLT saving. For example, for the purchase of a second residential property worth £300,000, the temporary cut will result in a tax saving of £5,000.
“The cut to SDLT eases the costs associated with buying residential property. On top of that, because SDLT can raise its head in other situations – for instance, gifts to children where the property is subject to a mortgage - it also makes it a great time to consider this. Such gifts can have Inheritance Tax advantages but the SDLT liability on them can be expensive. This SDLT holiday could reduce that exposure significantly – and, potentially, to nil.”
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.
Government and tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice from their financial adviser before making financial decisions.
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