Last year, the Chancellor introduced a temporary increase in the threshold for which stamp duty land tax (“SDLT”) was payable on UK properties. Previously you would only pay SDLT on properties worth more than £125,000. In July 2020, this threshold was temporarily increased to £500,000 and was due to end on 31 March 2021.
In today’s Budget, the Chancellor has confirmed that the £500,000 threshold will remain in place for a further three months and will end on 30 June 2021.
Furthermore, for the following three months the threshold will be reduced to £250,000 before returning to its usual level of £125,000 from 1 October 2021.
Is this good news?
When the threshold was first increased in July 2020, it was predicted that 90% of home buyers would benefit from the SDLT saving.
The SDLT holiday was seen as necessary to help boost the property market which had been significantly impacted by the pandemic. However, opponents are now suggesting that rather than prop up the property market, it has instead fuelled a disproportionate increase in property prices.
Concerns have been raised that a housing bubble has been created, which will burst when the SDLT rates return to their previous limits – this has led to fear that we could have another property crash when the limits returned from 1 April 2021, so the three-month extension followed by the subsequent gradual reduction in the limits is welcome news.
It is worth remembering if you already own one or more properties or the purchaser is a company that you will still have to pay the additional 3% SDLT on property purchases. However, the SDLT holiday means that you will be paying 3% (rather than 8%) on the value up to £500,000 so there is still a saving to be had.
One final thought though – if a property bubble is being created, will the SDLT savings justify the purchase of an overpriced property?
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