Vale & West Chartered Accountants Blog

Category Archives:Covid-19 – Property

Preparing for the end of the Stamp Duty Holiday

Introduced in July 2020, the Stamp Duty Land Tax (SDLT) Holiday has helped hundreds of homeowners and investors to reduce the cost of purchasing a new property.

However, the higher SDLT thresholds will change from 1 July increasing the cost of buying or transferring a home.

From the beginning of July, the SDLT rules will change so that the threshold at which tax is paid falls from £500,000 to £250,000.

This new rate of SDLT will remain in place until 1 October 2021, when it will fall again to just £125,000.

The new rates will be as follows:

Property or lease premium or transfer value from 1 July SDLT rate
Up to £250,000 0 per cent
The next £675,000 (the portion from £250,001 to £925,000) 5 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 10 per cent
The remaining amount (the portion above £1.5 million) 12 per cent

 

Property or lease premium or transfer value from 1 October SDLT rate
Up to £125,000 0 per cent
The next £125,000 (the portion from £125,001 to £250,000) 2 per cent
The next £675,000 (the portion from £250,001 to £925,000) 5 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 10 per cent
The remaining amount (the portion above £1.5 million) 12 per cent

Despite the changes, first-time buyers paying £300,000 or less for a residential property will continue to pay no SDLT and will only pay five per cent on properties worth between £300,000 and £500,000.

The latest changes are likely to subdue the market somewhat, as they will increase the costs of most transactions, especially given that the average UK house price in April 2021 was £251,000 according to the Office for National Statistics.

For landlords and investors, the impact will be far greater as they must pay an additional three per cent surcharge on each rate if they own more than one property already.

The costs could be even greater if the investor is non-resident in the UK due to the new two per cent surcharge for overseas buyers of UK property that has been introduced from April on top of the existing three per cent additional home surcharge.

For them, from 1 July, they could pay the following rates on property purchases or transfers if they already own a property in the UK:

Property or lease premium or transfer value from 1 July SDLT rate
Up to £250,000 5 per cent
The next £675,000 (the portion from £250,001 to £925,000) 10 per cent
The next £575,000 (the portion from £925,001 to £1.5 million) 15 per cent
The remaining amount (the portion above £1.5 million) 17 per cent

 Homebuyers, landlords and property investors need to carefully consider these changes as they could have a substantial impact on property values.

If you need advice on the upcoming changes to SDLT, please speak to a member of our team.

 

Government extends ban on commercial evictions until March 2022

The Treasury has reassured many distressed business owners by confirming that a moratorium on commercial evictions introduced in April 2020 will now be extended for another year.

The ban, introduced more than a year ago, has already been extended twice and was due to expire at the end of June but will now remain in place until at least March 2022.

Under the temporary rules, landlords of commercial properties are restricted from evicting tenants and are not permitted to recover rent arrears by selling a tenant’s goods.

Although not much additional financial support has been given in relation to the extension of lockdown restriction until 19 July, the Chief Secretary to the Treasury Stephen Barclay confirmed that help would be offered via the moratorium to struggling businesses.

Speaking in a statement on the economy in the Commons, Mr Barclay said that the extension to the current moratorium “strikes the right balance between protecting landlords and supporting those businesses that are most in need”.

He added: “We will introduce legislation in this parliamentary session to establish a backstop so that, where commercial negotiations between tenants and landlords are not successful, tenants and landlords go into binding arbitration.

“Until that legislation is on the statute book, existing measures will remain in place including extending the current moratorium to protect commercial tenants from eviction to 25 March 2022.”

The Government has reiterated that, where possible, tenants should start to pay rent again under the terms of their lease or as otherwise agreed with their landlords once restrictions are removed on their sector.

While this latest extension is positive news for many businesses, particularly those in hard-hit sectors such as hospitality and leisure, for commercial property landlords it may mean many more months without rental income or the option to evict tenants to bring in new paying businesses.

If you are affected financially by the latest extension to the ban and would like advice, please contact us.

Government publishes detailed guidance on SDLT holiday

During his Plan for Jobs announcement, the Chancellor Rishi Sunak announced a temporary eight-month cut in Stamp Duty Land Tax (SDLT) that ensures there is not a charge on ‘any’ residential property transactions with a value under £500,000.

The Government has achieved this by immediately lifting the lower SDLT nil rate band from £125,000 to £500,000, which it claims will mean that nine out of 10 main home buyers will not pay SDLT until the thresholds revert in March 2021 to their previous levels.

In its latest guidance, the Government has confirmed that the SDLT holiday only relates to residential property transactions up to £500,000 – above which the original rates continue to apply.

The guidance also confirms that the additional homes surcharge of three per cent will continue to be charged.

However, this applies across the newly-outlined threshold meaning that those subject to the surcharge will now pay three per cent on the first £500,000, rather than the first £125,000, which represents a significant discount on the previous SDLT rate.

Companies also benefit from this increase to the threshold, including businesses that buy residential property of any value above £500,000 where they meet the relief conditions from the corporate 15 per cent SDLT charge.

The nil rate band which applies to the ‘net present value’ of any rents payable for residential property on new leasehold sales and transfers is also increased to £500,000.

To help you visualise what this change means, we have prepared a helpful table below:

SDLT Holiday – First Time Buyer Rates SDLT Holiday – Non-First Time Buyer Rates (no additional properties) SDLT Holiday – Additional Homes Buyer Rates
£0 – £500,000 – 0% £0 – £500,000 – 0% £0 – £500,000 – 3%
£500,001 –£925,000 – 5% £500,001 –£925,000 – 5% £500,001 –£925,000 – 8%
£925,001 – £1.5 million – 10% £925,001 – £1.5 million – 10% £925,001 – £1.5 million – 13%
£1.5m+ – 12% £1.5m+ – 12% £1.5m+ – 15%

On 1 April 2021, the reduced rates shown in the above tables will revert to the normal rates of SDLT that were in place prior to 8 July 2020.

COVID-19: Government set to introduce Stamp Duty holiday

The Chancellor, Rishi Sunak, is set to announce the introduction of a Stamp Duty holiday in his summer statement on Wednesday 8 July 2020. Read More

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