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Stamp Duty cut opens door to home ownership

8th July 2020

The Chancellor confirmed the much-rumoured Stamp Duty Land Tax (SDLT) changes in his Summer Economic Update, as anticipated increasing the nil rate band from £125,000 to £500,000, so saving up to £15,000 for purchasers.

Before this change, the portion of a property priced between £125,000 and £500,000 had been subject to SDLT at between 2% and 5%.

The detail was better than expected:

  • The change is immediate, applying for completions, actual or deemed,  on or after 8 July and will apply until 31 March 2021. 
  • There are no carve-outs for contracts already exchanged – as long as the effective date for SDLT is 8 July or afterwards the saving will apply.
  • Surprisingly, there is a saving for those subject to the additional 3% charge – second home and buy-to-let purchasers and corporate buyers – for whom the 3% band will also increase to £500,000, again saving up to £15,000.
  • SDLT on residential lettings will be reduced, with the 1% charge not now applying until the net present value of rent under the lease reaches £500,000 – this saves up to £3,500, but rarely applies in practice. 

First Time Buyer’s Relief is suspended for the duration of the extension, as it is better than the relief.

One other important point to note is that, under devolution, SDLT only applies in England and Northern Ireland.  Wales and Scotland have their own equivalent taxes set by their parliaments.

Scotland has announced it will temporarily cut stamp duty, but the Welsh government has not yet said if it will follow suit.

The House of Commons Library has published a briefing document on the stamp duty cut for England.

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