In his Economic statement on 8 July 2020, Chancellor Rishi Sunak highlighted that property transactions fell by more than 50% in May, while house prices fell for the first time in eight years. Therefore, to help boost the housing market, he announced that there will be a temporary reduction in stamp duty land tax (SDLT) in England and Northern Ireland. The Scottish and Welsh Governments quickly followed suit announcing reductions in Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively.
To achieve the reduction, the nil rate band threshold for SDLT payments on residential property has been temporarily increased from £125,000 to £500,000. This change applies from 8 July 2020 but only applies until 31 March 2021. Current rates are therefore as follows:
|Portion of value||Rate %||Additional property rate %|
|£0 – £500,000||0||3|
|£500,001 – £925,000||5||8|
|£925,001 – 1,500,000||10||13|
From 1 April 2021 the £500,000 threshold will revert to £125,000.
These rates apply equally for first time buyers as they do for those who have owned property before.
Treasury estimates suggest that the average homebuyer will see their SDLT bill fall by £4,500 as a result of this temporary measure, and nearly nine out of ten main home buyers will pay no duty at all.
In Scotland, the LBTT nil threshold has been temporarily increased from £145,000 to £250,000 between 15 July 2020 and 31 March 2021. Current rates are therefore as follows:
|Purchase price||LBTT rate|
|Up to £250,000||0%|
|Above £250,001 to £325,000||5%|
|Above £325,001 to £750,000||10%|
The rates for the additional dwelling supplement (ADS) and non-residential LBTT remain unchanged.
Residential transactions for consideration of £40,000 or more will still require to be notified to Revenue Scotland even if no tax is due.
The reduced charges mean that someone buying a house at the average Scottish house price of £179,541 would expect to save £690 in LBTT. Overall, it is estimated that an additional 34% of property transactions will be taken out of LBTT, taking the total to 79%.
The Welsh Revenue Authority (WRA) has also announced changes to LTT charges, which apply from 27 July 2020 onwards. The new rates and threshold are as follows:
|Price threshold||LTT rate|
|The portion up to and including £250,000||0%|
|The portion over £250,001 up to and including £400,000||5%|
|The portion over £400,001 up to and including £750,000||7.5%|
|The portion over £750,001 up to and including £1,500,000||10%|
|The portion over £1,500,000||12%|
Higher residential tax rates for additional properties remain unchanged.
The Welsh Government estimates that around 80% of homebuyers in Wales will pay no tax when purchasing their home, and that buyers of residential property who would have paid the main rates of LTT before 27 July 2020 will save up to £2,450 in tax.
Partner Note: FA 2003, s 55; SDLT reduced rates: https://www.gov.uk/guidance/stamp-duty-land-tax-temporary-reduced-rates; LBTT guidance and rates: https://www.gov.scot/policies/taxes/land-and-buildings-transaction-tax/ ; LTT guidance and rates: https://gov.wales/land-transaction-tax-rates-and-bands