Stamp Duty Holiday During Covid-19

Posted on: 09/10/2020

Stamp Duty Holiday During Covid-19

Stamp duty rates have been temporarily reduced until 31 March 2021. This will mean sellers may get more if they sell fast and buyers may pay less if they buy quickly.

Therefore we have prepared this guide for you about stamp duty to help you take advantage of this beneficial period.

Feel free to jump straight to the heading that interests you:


1. What is Stamp Duty?

When you buy land or buildings in the UK, you have pay tax to the UK government depending on many variables. In England and Northern Ireland this tax is called stamp duty and its full name is Stamp Duty Land Tax. (SDLT). In Wales it’s called Land Transaction Tax (LTT) and in Scotland it goes by the name of Land and Buildings Transaction Tax (LBTT) with Additional Dwelling Supplement (ADS).

For the purposes of this article we will use the term ‘stamp duty’ throughout to mean SDLT, LTT, LBTT and or ADS. Different rates apply between these regional stamp duty taxes and depending on whether it is a single property or additional property.

Feel free to use at any point the Quick Property Buyer Stamp Duty Calculator

2. What is the Stamp Duty Holiday?

In order to stimulate the property market, the various regional governments introduced lower stamp duty rates until 31 March 2021. It has been described as a stamp duty holiday, but in fact this is somewhat a misnomer as for many situations stamp duty still will still apply.

If you are buying a single property in England or Northern Ireland up to £500,000 or in Scotland or Wales up to £250,000, yes there will be no stamp duty to pay. In most other situations though, it is a case that the stamp duty to pay has been temporarily reduced rather than waived. Think of it as a cheaper holiday rather than a free one.

3. Exemptions to Stamp Duty

Subject to various conditions, there are various exemptions to stamp duty which include the following:

  • (i) If you are buying a single property below the first threshold;
  • (ii) if you are going through a divorce and one party buys the other out;
  • (iii) if the additional property is less than £40,000;
  • (iiii) if you receive a property under a will or by a gift;
  • (v) if the house is purchased by an employer because the employee is being relocated;
  • (vi) an acquisition by a property trader in case of a relocation of employment;
  • (vii) an acquisition by a house-building company from an individual acquiring a new dwelling;
  • (viii) an acquisition by a property trader from an individual where the chain of transactions breaks down; and
  • (ix) an acquisition by a property trader from personal representatives.

Many of the above are very specific to certain situations, so we would recommend you seek expert legal advice in such circumstances.

4. Single Property or Additional Property

If you buy an additional property, the rate of stamp duty will be higher. This is primarily aimed at buy to let investors or those wanting a second home.

Any residential property that is not your primary residence will be in the first instance deemed an additional property for stamp duty purposes.

5. Additional Property Exemptions

If the second home is less than £40,000 there will be no stamp duty to pay. Likewise stamp duty is not payable on caravans, mobile homes and houseboats.

6. Stamp Duty and Divorce or Separation

(a) What happens if an ex buys another property? Although married couples and those in civil partnerships are treated as one entity, if you are divorced or clearly separated, you are not deemed as such. Therefore if a former partner buys a property, this is not deemed an additional property for stamp duty purposes.

(b) What happens if an ex buys you out of the former home? In this situation you can apply to the court for a Property Adjustment Order, showing that the ownership of the property has now passed to your former partner. You will then not need to pay stamp duty at the higher rate when you buy a home for yourself. If you have not obtained a Property Adjustment Order, so have paid stamp duty at the higher rate on your home, you have three years to claim it back.

7. Stamp Duty and Inheritance

(a) If I inherit a property, what happens?
You do not pay stamp duty when you inherit a property.

(b) If I inherit a property and then buy another home?
If you keep the inherited property, and then subsequently replace your home with another, you will simply pay the normal stamp duty rates on the new purchase. This is [provided that you sell your primary residence before you buy the new one. If you have not sold the existing primary residence beforehand, you pay the higher stamp duty rate. But you can reclaim this extra amount if you do subsequently sell your original primary residence within a certain time period.

(c) If I inherit a property as a first time buyer?
If you inherit a property without owning one and then subsequently buy your first home, you will not pay the higher rate on the new purchase if you have no more than 50% interest in the inherited property. If you inherited it outright, you will pay the higher stamp duty if you buy another property.

8. Stamp Duty Rates

Feel free to use the Quick Property Buyer Stamp Duty Calculator, but the current rates to 31 March 2021 are as follows:

Single Property Additional Property
England/Northern Ireland (SDLT) Up to £500,000 0%
£500,001 to £925,000 5%
£925,001 to £1.5 million 10%
The remaining amount 12%
Up to £500,000 3%
£500,001 to £925,000 8%
£925,001 to £1.5 million 13%
The remaining amount 15%

No stamp duty is payable if the property is less than £40,000.
     
Wales Up to £250,000 0%
£250,001 to £400,000 5%
£400,001 to £750,000 7.5%
£750,001 to £1,500,000 10%
The remaining amount 12%
Up to £180,000 3%
£180,001 to £250,000 6.5%
£250,001 to £400,000 8%
£400,001 to £750,000 10.5%
£750,001 to £1,500,000 13%
The remaining amount 15%

No stamp duty is payable if the property is less than £40,000.
     
Scotland Up to £250,000 0%
£250,001 to £325,000 5%
£325,001 to £750,000 10%
The remaining amount 12%
Up to £250,000 4%
£250,001 to £325,000 9%
£325,001 to £750,000 14%
The remaining amount 16%

No stamp duty is payable if the property is less than £40,000.
     

9. Stamp Duty and Corporate Bodies: The 15% Rate

The is a particular 15% rate that applies to buyers who are corporate bodies, or “non-natural persons”. Such bodies can include companies, partnerships and collective investment schemes.

Primarily it is aimed at foreign buyers who purchase UK property through offshore companies, but can capture other circumstances.

It does not apply to any of the following below. In these circumstances, the stamp duty rates on Additional properties will apply instead.

  • a property rental business
  • property developers and trader
  • property made available to the public
  • financial institutions acquiring property in the course of lending
  • property occupied by employees
  • farmhouses

10. Quick Property Buyer is here to help

We would always recommend you discuss with your solicitor your individual circumstances to ensure that you are paying the right stamp duty. Also always check their figures yourself on a stamp duty calculator such as ours.

If you decide you would like to sell your property fast to try to take advantage of the better stamp duty rates, please do not delay in contacting us.

We’re experienced at dealing sensitively with challenging situations, including those involving a divorce or inheritance, so do get a cash offer from us today.




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