During the height of the Corona virus pandemic the housing market almost completely shut down as estate agents had to shut and viewings initially, were banned. Added to this, for many of us, our financial position was such that the financial outlay for a new home was unachievable. As the first lockdown started to ease the Government announced that there would be an SDLT reduction meaning that some people could save up to £15,000 on a property purchase. As we entered the second and third lockdowns the Government extended the SDLT (stamp duty land tax) freeze and at the end of June 30th, 2021, the biggest savings stopped, leading to many people thinking that the scheme had ended. This is, however, not the case and there are still very good savings to be had under the scheme.
Pre-Covid scheme
Pre-covid SDLT was payable on any properties over £125,000 based on the value of the property. For example a property purchase of £300,000 under the pre-Covid SDLT would have a liability of £2,499.98 (£6249.95 second home) + £2,499.95 (£3,999.92 second home) = a total SDLT liability of £4,999.96 (£10,249.87 if a second home).
- £0-£125,000 = 0% (3% for second homes)
- £125,001-£250,000 = 2% (5% for second homes)
- £250,001-£925,000 = 5% (8% for second homes)
- £925,000-£1,500,000 = 10% (13% for second homes)
- £1,500,000+ = 12% (15% for second homes)
The rates for first time buyers were slightly different with no SDLT payable on the first £300,000 and only 5% payable on the portion between £300,001 and £500,000. If the property price was above £500,000 then the standard rates of SDLT applied and there was no relief
Current scheme
The current scheme came into force on the 1st July 2021 as a phased return to pre-Covid levels of SDLT. This was to avoid a cliff edge return to the normal levels and to allow time for property sales to go through before the end of the incentive. From the 1st of July the following rates have applied for property purchases:
- £0-£250,000 = 0% (3% for second homes)
- £250,001-£925,000 = 5% (8% for second homes)
- £925,001-£1,500,000 = 10% (13% for second homes)
- £1,500,000+ = 12% (15% for second homes)
Even though the new system has lower SDLT thresholds, for someone buying a property the saving is £2,500 which is not insignificant. For example: a property purchase of £300,000 under the current scheme will have an SDLT liability of 5% of £49,999 (or 8% if this is a second home purchase) = £2,499.95 (or £3,999.92 if a second home). Saving £2,500 or £6,3250 if purchasing a second home.
The important thing to note is that the purchase must be completed by the time the scheme ends which is currently set at the 30th of September 2021 and from the 1st October 2021 the SDLT rates will revert back to the pre-covid levels.
The relief for first time buyers, however, reverted to the pre-covid levels as of the 1st of July 2021 meaning that the savings for first time buyers are £5,000. Prior to the 1st of July, this relief was halted as the savings under the new scheme were larger.
The Government is working hard to keep the housing market buoyant and to make it affordable for people, in these uncertain times to buy a new home. Although the biggest savings have now stopped, there are still significant savings to be had under the SDLT holiday scheme and it is not too late to buy a property and take advantage of the savings.
