29 September 2022 by Melanie Carroll

Stamp Duty Land Tax Reduction – what the changes mean for you

Brick house with mortgage for sale

In the “mini” budget announced on 23 September 2022, the Chancellor made changes to the thresholds for stamp duty land tax (SDLT).  It wasn’t much of a secret – an announcement had been made on the Wednesday before, leading to much speculation about the content.  This also caused a pause in deals being done, whilst purchasers waited to see if they could benefit financially.

The theme of the budget was to create an economy based on high growth and low tax, enabling people to keep more of the money that they earn and drive investment in business.  There were also significant changes introduced for first-time buyers ensuring the first-time buyer relief remained ‘relevant’.

New rates

In general terms, the measures increased the amount that a purchaser can pay for residential property before they become liable to pay SDLT.

The residential ‘nil-rate’ threshold was increased from £125,000 to £250,000.

The ‘nil-rate’ threshold for first-time buyers claiming relief increased from £300,000 to £425,000 and the maximum amount that an individual can pay while remaining eligible for the relief was increased from £500,000 to £625,000.

The rules did not change the ‘higher rate’ of 3% on additional dwellings but, as the nil-rate tax threshold has been increased, this will still mean a small SDLT saving for second homeowners too.  They will now pay 3% on the value up to £250,000, rather than up to £125,000 – a saving of £2,500.

Effective from and to?

The rules were announced on, and operative from, 23 September 2022 and so affected completions scheduled for that day – making for an interesting Friday!  Most real estate lawyers were breathing a sigh of collective relief, however, when the announcement had no ‘cut off’ and was introduced as a permanent change rather than a ‘holiday’.  However, it’s worth noting that further changes could be made at ensuing budgets – so watch this space.

Application

The measures introduced affect all purchasers of property in England and Northern Ireland – but not in Wales and Scotland where the rules/thresholds are different.  The Welsh Government have just announced changes to broadly follow the measures implemented and these will come into force on 10 October 2022.

What you need to do

If you’re purchasing a property, and did not complete by 23 September 2022, then the amount of SDLT you will be due to pay will change and change for the better!  This will need to be recalculated and any SDLT return which has been prepared will need to be revised.

Melanie Carroll, Head of Residential Real Estate says:

  • A permanent change is preferable from the ‘cliff edge’ created by the SDLT holidays of 2020/2021
  • The most notable impact is on first time buyers, which is where efforts should be focused, given that house prices have been on an upwards trajectory – particularly in the capital
  • With a difficult winter ahead for many, with the cost-of-living crisis, fuel bill increases and higher interest rates, any help to maintain the property market is most welcome
  • It will be interesting to see what impact this has on the property market generally, as this has continued to buoy following the SDLT holidays and so it’s questionable whether these changes were needed at all
  • There remains a problem of demand outweighing supply, and these SDLT changes will do little to address the chronic housing shortage – a firmer commitment to house building is required also to reverse this
  • The house buying process has been the subject of criticism in recent years, with pipelines being longer than ever before – can the infrastructure cope with the possible surge in demand?
  • Commentators will continue to discuss whether SDLT should exist at all – or whether, controversially, sellers should pay it – but, for now, this is the regime that’s in place and this is what we will continue to work with

Please contact the Residential Real Estate team at Bolt Burdon for further information on buying a property and the SDLT payable.

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