The New Stamp Duty Rules Explained

There’s no doubt that the government is fully aware of the huge efforts that are going to be needed to bring the economy back to life following the serious setbacks caused Covid-19 pandemic.

One of the most headline-grabbing of the measures announced by the chancellor, Rishi Sunak has been the suspension of Stamp Duty, or Stamp Duty Land Tax to give it its full title, up until 31st March 2021. The aim is to stimulate the property market, considered to be a vital part of the economy.

Stamp Duty is a tax that the majority of home buyers have to pay when purchasing any property and is charged as a percentage of the purchase price on a sliding scale according to which price band the property is in.

The tax is payable within 14 days of completing any purchase and payment is generally handled by the solicitor who has carried out the conveyancing for you.

Who qualifies for the new zero rate?

Anyone who completes the purchase of a property in England or Northern Ireland costing up to £500,000 will have to pay no Stamp Duty at all. For properties over this value, there will be a charge for the portion of the purchase price that falls in the following bands:

Up to £500,000                                               No charge

Between £501,000 and £925,000                  5%

Between £925,001 and £1.5 million               10%

Over £1.5 million                                             12%

Here are a couple of examples to show how this will work in practice:

If you buy a house for £575,000, the Stamp Duty Land Tax you owe is calculated as follows:

• 0% on the first £500,000 = £0
• 5% on the final £75,000 = £3,750

Total SDLT = £3,750

If the house costs £1,250,000, the Stamp Duty Land Tax you owe is calculated as follows:

• 0% on the first £500,000 = £0
• 5% on the portion between £500,001 and £925,000 = £21,250
• 10% on the portion between £925,001 and £1,250,000 = £32,499

Total SDLT = £53,749

Stamp Duty only applies to properties in England and Northern Ireland. In Scotland, you will pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of Stamp Duty.

Stamp Duty on second homes

The zero rate only applies for primary residences. For second homes and certain buy to let properties, the following rate bands apply. As with all Stamp Duty costs, you only pay the rate for the particular portion of the purchase price within the relevant rate band:

Up to £500,000                                               3%

Between £501,000 and £925,000                  8%

Between £925,001 and £1.5 million               13%

Over £1.5 million                                             15%

Example: You buy a second home for £650,000

• 3% on the first £500,000 = £15,000
• 8% on the portion between £500,001 and £650,000 = £11,999

Total SDLT = £26,999

Repayment of higher rates of Stamp Duty

You may find that If you buy a new main residence but there’s a delay in selling your previous main residence, you’ll have to pay the higher Stamp Duty rates as your new home will effectively be a second property.

But, if you sell or give away your previous main home within 3 years of buying your new home, you will be able to apply for a refund of the higher SDLT rate part of your Stamp Duty bill.

You can request a refund for the amount above the normal Stamp Duty rates if:

• you sell your previous main residence within three years, and
• you claim the refund within three months of the sale of your previous main residence, or within 12 months of the filing date of your SDLT tax return, whichever comes later.

At Eatons, we will be able to advise about his and all other matters surrounding the Stamp Duty payable on any purchase. We also offer a full range of conveyancing services including:

• Preparing the Property Information and Fittings and Contents Forms
• Drawing up contracts
• Checking the mortgage offer
• Exchanging contracts and completion
• Registering the property
• Arranging the payment of any Stamp Duty that may be due

It goes without saying that We’re as keen as anyone to help bring the property market back to life and can play our part by taking care of the legalities on your behalf. If you have any questions, or to make full use of our services, simply contact your nearest Eatons office or   email us at enquiries@eatons-solicitors.co.uk and we will get back to you as soon as possible to take things further

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