Stamp Duty Land Tax Holiday for 1st £500,000 on property purchases

simon

Simon Misiewicz

8th July 2020


Article relevant to the tax year 2020/21

Stamp Duty Land Tax Holiday

You may be interested in our main article “buy to let tax for UK landlords”. This article discusses all the different types of tax that you need to be aware of as a UK landlord.

We have written an article that shows what Stamp Duty Land Tax is and how it is calculated. You may wish to calculate and save the SDLT liability. We have created a modestly priced spreadsheet for you to do this. Go ahead and buy the SDLT calculator for just £9.95

You can read more about the Stamp Duty Land Tax: temporary reduced rates

What is the Stamp Duty Land Tax Holiday?

Rishi Sunak announced on Wednesday 8th July in the mini summer budget that the Stamp Duty Land Tax would be 0% from that day until 31st Match 2021. This means that you would not pay any Stamp Duty Land Tax if you are to buy a home or a replacement home with a value of £500,000

How much will people save with the Stamp Duty Land Tax Holiday?

Homeowners and buy to let investors could save £15,000 on a house purchase that is worth £500,000 or more. This is because the 5% rate of Stamp Duty Land Tax is reduced as follows

Stamp Duty Land Tax at the old rate

Sarah wants to buy a property with a value of £500,000. The old Stamp Duty Land Tax (SDLT) charge would be as follows:

£0 – 0% from £1 to £125,000

£2,500 – 2% from £125,001 to £250,000

£12,500 – 5% from £250,001 to £500,000 (5% rate is to £925,000)

£15,000

Stamp Duty Land Tax at the new rate holiday rate until 31st March 2021

Sarah wants to buy a property with a value of £500,000. The old Stamp Duty Land Tax (SDLT) charge would be as follows:

£0 – 0% from £1 to £500,000

As you can see that Sarah would save the £15,000 Stamp Duty Land Tax because of the holiday period that starts from 8th July 2020 and ends 31st March 2021.

Stamp Duty Land Tax Calculator – £9.95

This SDLT calculator will tell you how much is to pay and how to reduce it further.




Do the Stamp Duty Land Tax apply to UK landlords

Surprisingly enough the answer is yes.

In his announcement Rishi Sunak on numerous occasions said homes. This would suggest that the Stamp Duty Land Tax holiday would not benefit UK buy to let landlords. However, in the public release about the Stamp Duty Land Tax: temporary reduced rates Rishi Sunak said “Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.”

This confirms that UK buy to let landlords will benefit from the Stamp Duty Land Tax Holiday from 8th July 2020 to 31st March 2021. This 0% Stamp Duty Land Tax holiday rate applies to UK landlords irrespective if they purchase a buy to let property in their own name or in a limited company

 

Will buy to let property investors still pay the 3% SDLT higher rate?

The short answer to this question is, yes. The 3% SDLT higher rate will still apply for residential properties above £40,000. This applies to individuals that already have a house in their name. This 3% SDLT higher rate also applies when you purchase a buy to let property inside of a limited company.

What other opportunities exist for UK buy to let landlords?

There are a number of opportunities that buy to let landlords can now take advantage of. The following opportunities now arise because of the Stamp Duty Land Tax holiday.

Move a buy to let property into a limited company 

We discussed how to move a buy to let property into a limited company. One of the reasons why many UK landlords do not take this approach is because of Capital Gains Tax (CGT) and Stamp Duty Land Tax.

The Stamp Duty Land Tax holiday might make this move more reasonable. Especially if UK landlords can save £15,000 on each property.

Mortgage editors comments

Lately, we’ve seen a huge influx of enquiries from investors looking to take advantage of long term tax-saving strategies and reduced SDLT rates by moving their buy-to-lets into an SPV limited company.

Counter-intuitively, a personally-held buy-to-let needs to be ‘sold’ to the limited company in order to transfer ownership; incurring stamp duty and solicitors’ costs along the way.

But there’s good news. The equity within a buy-to-let can often be used to cover these irritating transfer costs – keeping the whole transaction cash-free.

And it gets better; the equity can also be used to help fund future investment purchases and help property investors build out their buy-to-let portfolio.

Lower SDLT for landlords, equity release options to purchase more buy-to-let property, and lower rates of tax through an SPV – win-win!

Want to see if you’re eligible for a SPV mortgage? Get in touch with our SPV mortgage specialists at SPV Company Mortgages (insert link) https://www.limitedcompanyspvmortgages.co.uk/contact-us/

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