Thousands of property buyers and sellers will be pleased to learn that the Chancellor has not only extended the Stamp Duty Land Tax (SDLT) holiday, but also offered a follow-on temporary change to the threshold to provide support to the sector for longer.
The current SDLT holiday, which ensures no main rate of Stamp Duty is due on homes worth up to £500,000 will now end on 30 June 2021.
It will be followed from 1 July 2021 to 30 September 2021 by a lowered nil rate band of £250,000. Finally, the nil rate band will return to the standard amount of £125,000 on 1 October 2021.
The main aim of this support is to ensure that those looking to buy have the confidence that they will benefit from this holiday for some time to come, but the extension also means that investors with existing portfolios can still benefit from transferring properties into a limited company at a lower cost.
This is especially useful for buy-to-let landlords, who can benefit from mortgage interest relief if they incorporate, which could help them save tens of thousands of pounds over their mortgage term.
Like property sales, transfers are subject to SDLT. Usually, this would mean that investors not only have to pay the main rate of SDLT but also the additional three per cent surcharge if they own other properties.
On a home valued at the current nil rate threshold of £500,000, investors would normally have to pay eight per cent SDLT on the transfer but thanks to the holiday they only pay three per cent up until the end of June.
This means that transferring a property worth £500,000 during the current holiday could help portfolio holders to save £15,000 per property over the regular cost of incorporation, while also allowing them to take full advantage of the benefits of owning property via a limited company.
Even waiting until the threshold falls to £250,000 could still save landlords thousands of pounds. However, to benefit from the SDLT holiday it is best that investors act now.
Beyond the immediate benefits for your current portfolio, all future properties brought via the limited company will then benefit from being incorporated and enjoy the immediate benefit of mortgage interest relief.
If you would like advice on incorporating a property portfolio into a limited company structure and how this could reduce the amount of tax you pay, please speak to our property specialists today.