10 Things to Know About UK Stamp Duty in 2021

28 Jul 2021
1. What is stamp duty?

Stamp Duty Land Tax (SDLT) is a progressive tax paid when purchasing leasehold, freehold or shared ownership real estate over £125,000 in England, Northern Ireland and Wales. In Scotland, it is called Land and Buildings Transaction Tax (LBTT).

2. Who pays stamp duty tax?

Everyone who purchases a property in the UK – whether residential or non-residential – pays Stamp Duty Land Tax. This includes corporate bodies, overseas citizens and non-natural persons.

3. What is the stamp duty holiday?

The stamp duty holiday was announced on the 8th of July 2020 to support the housing market amidst COVID-19 and Brexit discussions. It is a temporary reduction in the rate of stamp duty payable on a progressive scale. Some buyers can save up to £15,000 in stamp duty by purchasing a property before the holiday ends. The holiday will be phased out starting from 1 July 2021.

4. Does stamp duty tax apply on exchange or completion?
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Stamp duty applies from the completion of a property purchase. Regardless of when you exchanged contracts, if you complete your purchase between 8 July 2020 and the end of the stamp duty holiday, you will be able to take advantage of the change. 

5. How much will stamp duty tax be in 2021?

The stamp duty holiday stipulates that first-time buyers will pay zero stamp duty on properties up to the value of GBP500,000. The threshold for zero stamp duty will be reduced to GBP250,000 from 1 July and reach pre-holiday rates at the original GBP125,000 threshold by 1 October. However, buy-to-let and second-home buyers receive a 3% surcharge and thus the calculations for stamp duty payable based on property value bands can be further explained in the table below.

UK Stamp Duty 2021

6. Will the UK stamp duty holiday be extended?

Initially, the stamp duty holiday was set to end in April 2021. However, in the budget address on March 3rd, an extension was announced. A phase-out approach will be used, with periodic surcharges, until the stamp duty is back to original rates in October 2021. No further news has been released about another extension and with UK house prices soaring due to increased demand, it is unlikely to occur.

7. When is stamp duty tax paid?

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Stamp duty is payable to HM Revenue & Customs (HMRC) 14 days from the date of completion, otherwise, late penalties apply. At IP Global, your solicitor will take care of this and make sure the deadline isn’t missed.

8. How do I reduce stamp duty tax?

Stamp duty tax is only payable on your property’s permanent building fixtures. This means that if you have removable fixtures and fittings – such as fridges, sofas, freestanding wardrobes, curtains and carpets – they are not subject to the SDLT tax. You can therefore subtract these items from the total property price.

9. Who is exempt from stamp duty land tax?

There are several exceptions to when you need to pay SDLT. You may not have to pay SDLT if you are purchasing your first home, although you will still need to submit a return. However, you do not have to pay SDLT or file a return if property is left to you in a will, or is transferred to you because of a divorce. Also, SDLT does not apply to freehold properties bought for less than £40,000.

Finally, SDLT exemptions also apply if you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000; or if you buy a new or assigned lease of shorter than 7 years, as long as the amount you pay is less than the residential or non-residential SDLT threshold.

10. Will house prices fall after the stamp duty holiday?
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The phase-out approach could mean that property prices continue to rise between July and the end of September 2021. In the long term, it is likely that property prices will stabilize as sales slow down after the holiday.
For more information, or to find out about our investment opportunities benefiting from a significant stamp duty saving, contact us now.  

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