What is Stamp Duty for Residential Purchases?
Stamp Duty Land Tax has been an important consideration for purchasers since its introduction in the Finance Act 2003. It is a tax paid by purchasers upon a purchase of a property. It must be paid within 14 days of completion. Determination of the payable sum Stamp Duty Land Tax is dependent upon the consideration of the purchase, however, various other factors related to a purchase can increase or waive amounts payable. Considerations include:-
1. Is the purchaser a First Time buyer;
2. Will the purchaser own 2 or more properties;
3. Has the purchaser replaced their previous main place of residence.
What is the Stamp Duty Land Tax Holiday?
The Stamp Duty Land Tax Holiday was introduced by the Treasury as a mean to ‘kick start’ the housing market since its pause during the Covid-19 pandemic and associated restrictions during Spring 2020. Under the Holiday scheme, residential movers and investors benefit as the Stamp Duty Land Tax threshold was increased.
During the initial holiday period which lasted until 30th June 2021, the following rates applied:-
| Property value if replacing previous main place of residence | SDLT rate |
| Up to £500,000 | Zero |
| £500,001 to £925,000 | 5% |
| £925,001 to £1.5 million | 10% |
| Above £1.5 million | 12% |
This Holiday period saw great success within the housing market, as Halifax reported a high volume of housing sales and housing prices increased by 9.3% in Northern Ireland. As the United Kingdom begins to ease its Covid-19 restrictions, a gradual reduction of the Stamp Duty Land Tax Holiday took affect between 1st July 2021 to 30th September 2021 whereby taxation threshold was reduced from from £500,000.00 to £250,000.00. This reduction in the threshold limited did not see any drop of in the housing sales and purchasers sought to take advantage of the taxation holiday period.
October 2021 – A Return to the Normality?
As Stamp Duty Land Tax Holiday period draws to an end on 30th September 2021, the Stamp Duty Land Tax thresholds will revert to its pre Covid-19 pandemic level as set out in the below table:-
| Property value for transactions not being second homes | SDLT rate |
| Up to £125,000 | Zero |
| £125,001 to £250,000 | 2% |
| £250,001 to £925,000 | 5% |
| £925,001 to £1.5 million | 10% |
| Above £1.5 million | 12% |
The Stamp Duty Land Tax Holiday has undoubtably exceeded expectations in its efforts to assist the housing market during a global pandemic. However, the end of the Holiday period should not result in cause for concern for the those seeking to purchase their next residential property.
Nationwide Building Society has stated that as the taxation Holiday periods closes, there may only be a minimal impact upon the housing market as purchasers remain in a “race for space”, seeking larger homes and properties with gardens. Moreover, the overall reduced supply in housing and greater demand for homes will continue, resulting in purchasers facing further property price increases.
Therefore, residential purchasers must continue to be aware of the end of Stamp Duty Land Tax Holiday period and the return of Stamp Duty Land Tax to its pre Covid-19 thresholds. Growth continues in the housing market with lenders and estate agents not expecting any radical decline in prices or demand for homes.
Residential purchasers should consult with their conveyancing solicitor and financial adviser prior to a purchase to ensure they are aware of the relevant changes in taxation threshold and the legal conveyancing process. Receiving informed advice in relation to this important change in our taxation and legal process is vital before entering the housing market. You must be aware of the potential Stamp Duty Land Tax liability upon completion, including factors which may increase or decrease any sum payable. Therefore, please do not hesitate to contact us at O’Reilly Stewart Solicitors should you wish to receive more information, as we would be glad to assist through the conveyancing process, highlighting important issues which you may encounter, and provide key advice as you begin your journey towards moving into your new home.