Stamp Duty Land Tax - Changes

8th September 2008

Property purchased between 3rd September 2008 and 2nd September 2009 inclusive

Stamp Duty Land Tax (“SDLT”) is the tax you pay to HM Revenue and Customs (“HMRC”) when you purchase property and is calculated as a percentage of the purchase price of the property.

On 2nd September 2008 the Government announced changes to the thresholds for purchases completing between 3rd September 2008 and 2nd September 2009 inclusive.

Where the purchase price of the property is £175,000 or less, 0% SDLT will be payable. Previously the nil rate band only applied to transactions where the purchase price was £125,000 or less.

This change could potentially save buyers up to a maximum of £1,750.

This “Stamp Duty Holiday” is part of a package of reforms the Government has introduced in an attempt to boost the UK property market and in particular, to assist first time buyers (see below “Other reforms”). However, the higher threshold is scheduled to be in place for one year only.

The changes will effect the rates as follows:

Residential property - purchase price Rate of SDLT

up to £175,000 (until 2 September 2009 inclusive) 0%
£175,001 - £250,000 1%
£250,001 - £500,000 3%
£500,001 or more 4%

It should be noted that purchasers or their Solicitors are still required to submit a SDLT Form to HMRC even though no tax may actually be payable on the transaction.

Disadvantaged areas

Historically, properties purchased in areas designated by the Government as “disadvantaged” qualified for additional relief from SDLT (higher nil rate band). This relief will not apply for properties purchased between 3rd September 2008 and 2nd September 2009 inclusive, and all properties purchased will be subject to the same rates.

Other reforms Other measures introduced by the Government included the following:

• Funding for Social Housing
Bringing forward funding from existing budgets for social housing in order to deliver more properties sooner.

• The introduction of government loan schemes to assist first time buyers
First time buyers with a household income of £60,000 or less may be able to obtain a free of charge equity loan for up to 30% of the property’s value. The scheme known as “HomeDirect” will be aimed at newly built properties with funding coming from the Government as well as property developers. However, The Law Society have warned that home buyers seeking to enter into this loan scheme should be aware of the risks involved. For example, if the property market improves, the buyer may be left with a smaller proportion of the equity in the property.

• Mortgage Rescue Scheme
This will allow those homeowners who are struggling to pay their mortgage to sell their property to a Registered Social Landlord (“RSL”) who will clear the mortgage and then rent it back to them at a reasonable rent.

SDLT Tax Planning

We are able to assist those purchasing properties at a price in excess of £1 million who wish to consider ways of reducing their potential liability.

© Stone King LLP

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