Landlord Knowledge - Home of the Savvy Buy to Let Property Investor

Beware holiday hitches

There may be a Stamp Duty holiday, but this is a tax that cannot be ignored, says Ella Pumford, content manager at St Modwen Homes.

With property prices shooting upwards, more and more property purchases attract SDLT Land Tax. For landlords it is an important issue to be factored in to their investments. This is not made easier because SDLT is in transition and rates and rules are likely to change before the end of the year.

Currently there is a SDLT holiday, but it will not last indefinitely.

Simply put, SDLT is a tax on property purchases – it is the buyer who pays, not the seller. According to HM Revenue and Customs, it raises a total of about £12b every year for the government.

The Scottish version of SDLT is the Land and Buildings Transaction Tax. And in Wales, homebuyers may have to pay a Land Transaction Tax.

As part of its response to the coronavirus crisis, the government introduced a SDLT holiday that is still in place.

Since July 2020, people buying homes in England and Northern Ireland have not paid the duty tax on the first £500,000 of the purchase price of their only home. The 3 per cent surcharge for second (and therefore rented homes) still applies.

The rates previous to this meant that SDLT was paid on principal homes purchased for £125,000 and above.

Originally rates were set to return to their pre-pandemic level after 31 March 2021. However, the SDLT holiday has since been extended.

The concession was made in support of the housing market, about which there were initially fears of serious disruption due to COVID. It was worked with a vengeance.

The scheme has proved popular for homebuyers, homebuilding businesses, and estate agents.

The SDLT holiday is now due to end on 30 June 2021. But that will not be the end of it, because we already know there will be further changes in the Autumn.

However, some home-buyers may be able to extend the current holiday longer in the sense that some homebuilders, such as St. Modwen Homes, are now offering to pay SDLT on selected properties (terms and conditions apply, of course).

Tax can be complicated; we all know it. And SDLT comes with so many rules and caveats. Ultimately, the amount of duty to pay depends on the intended use of  the property, whether it is bought single or together with others, whether it is freehold or leasehold, its price, and where it is.

Fortunately there is a Government online facility that allows property buyers to calculate their SDLT liability in advance. It is worth using.