For almost a year now, the property market has benefitted from an uplift from the Government Stamp Duty Land Tax (SDLT) holiday, but as of 1 July, things are changing, which could increase the cost of buying or selling a home or transferring it into a limited company.
Announced after the end of the first lockdown in July 2020, the SDLT holiday has helped to reinvigorate the market, causing house transactions to increase substantially and property prices to rise sharply.
However, like many great holidays, it can’t go on forever and so from 1 July, the rules will change so that the threshold at which tax is paid falls from £500,000 to £250,000.
This new rate of SDLT will remain in place until 1 October 2021, when it will fall again to the original rate of just £125,000.
Despite the changes, first-time buyers paying £300,000 or less for a residential property will continue to pay no SDLT and will only pay five per cent on properties worth between £300,000 and £500,000.
The latest changes are likely to subdue the market somewhat, as they will increase the costs of most transactions, especially given that the average UK house price in April 2021 was £251,000 according to the Office for National Statistics.
For landlords and investors, the impact will be far greater as they must pay an additional three per cent surcharge if they own more than one property already.
For them the rates will increase as follows from July and October:
| Property or lease premium or transfer value from 1 July | SDLT rate |
| Up to £250,000 | 3 per cent |
| The next £675,000 (the portion from £250,001 to £925,000) | 8 per cent |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13 per cent |
| The remaining amount (the portion above £1.5 million) | 15 per cent |
| Property or lease premium or transfer value from 1 October | SDLT rate |
| Up to £125,000 | 3 per cent |
| The next £125,000 (the portion from £125,001 to £250,000) | 5 per cent |
| The next £675,000 (the portion from £250,001 to £925,000) | 8 per cent |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13 per cent |
| The remaining amount (the portion above £1.5 million) | 15 per cent |
The costs could be even greater if the investor is non-resident in the UK due to the new two per cent surcharge for overseas buyers of UK property that has been introduced on top of the existing three per cent additional home surcharge.
For them, from 1 July, they could pay the following rates on property purchases or transfers in the UK:
| Property or lease premium or transfer value from 1 July | SDLT rate |
| Up to £250,000 | 5 per cent |
| The next £675,000 (the portion from £250,001 to £925,000) | 10 per cent |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 15 per cent |
| The remaining amount (the portion above £1.5 million) | 17 per cent |
Given that the UK remains a popular destination for overseas property investment, these changes combined could have a significant impact on the attractiveness of UK homes and flats.
Property investors, estate agents and developers need to take into consideration these changes and their potential effect on residential property prices, transactions and transfers later this year, so that they can plan accordingly for any drop in demand.
If you need advice on the upcoming changes to SDLT, please speak to our specialist property team today.