Beat the Deadline to Avail Stamp Duty Land Tax Increased Threshold Opportunity

SDLT Tax

Beat the Deadline to Avail Stamp Duty Land Tax Increased Threshold Opportunity

The Residential Stamp Duty Land Tax (SDLT tax) saw an increase in the threshold to £500,000. The higher threshold is applicable upon completion between 8 July 2020 and 31 March 2021. From 1st April 2021, there’s a chance that the threshold will revert to £125,000. A higher threshold of £300,000 applies to people who’re buying a property for the very first time.  The price of the property must not be more than £500,000. 

 

What Comes with the Package?

 

Are you wondering what additional taxes/ charges do you have to pay? Of course, an accountant comes in to save your day.  Understanding what other taxes apply is one hell of a tax. The SDLT supplement is around 3% when the buyer purchases another property around  £40,000 or more.  This can be a buy-to-let property or even your holiday home. This is not applicable when a buyer sells their property to buy another one.  Let’s discuss one example:

 

Marry spends X amount on buying a penthouse. Her penthouse costs around £450,000 and she’s bought it in February 2021. So she’s not eligible for the SDLT tax, as the minimum threshold for it is around £500,000. But somehow she’s finding another better deal, so she wants to sell off the penthouse and invest in another opportunity. The additional SDLT tax supplement of 3% won’t be applicable on this deal, as she’s selling off one property to invest in another one. Not buying another property. 

 

Please note that the SDLT tax supplement remains 3% just until 31st March 2021. If you’re spending on another property after that time period, it may prove costly for you.  Take a look at the SDLT tax rates applying between 8th July 2020 to 31st March 2021. Also, please note the list of rates applying from 1st April 2021 onwards.

 

8 July 2020 to 31 March 2021

 

Consideration

SDLT rate
Main or only residence Second and subsequent properties
Up to £500,000 0% 3%
The next £425,000 (£500,001 to £925,000) 5% 8%
The next £575,000 (£925,001 to £1.5 million) 10% 13%
The remainder (above £15 million) 12% 15%

 

From 1 April 2021

 

Consideration

SDLT rate
Main or only residence Second and subsequent properties
Up to £125,000* 0% 3%
The next £125,000 (£125,001 to £250,000)* 2% 5%
The next £675,000 (£250,001 to £925,000) 5% 8%
The next £575,000 (£925,001 to £1.5 million) 10% 13%
The remainder (above £15 million) 12% 15%

 

From 1 April 2021

 

Consideration

SDLT rate
Main or only residence Second and subsequent properties
Up to £125,000* 0% 3%
The next £125,000 (£125,001 to £250,000)* 2% 5%
The next £675,000 (£250,001 to £925,000) 5% 8%
The next £575,000 (£925,001 to £1.5 million) 10% 13%
The remainder (above £15 million) 12% 15%

 

If you’re a first time, please note that on the purchase of £500,000, you don’t have to pay anything in form of SDLT. 

 

What’s the Cost of Missing Out on the Deadlines?

 

Let’s understand the penalties with an example. Alex is about to invest  £400,000 in a property. He already owns 2 residential properties and a mansion. So, of course, an SDLT of 3% applies. 

If he makes the purchase before March 2021, he’ll be paying an SDLT tax of  £12,000 (£400,000 @ 3%). If he buys the property after march (let’s say in April) he’ll be paying an SDLT tax of £22,000 ((£125,000 @ 3%) + (£125,000 @ 5%) + (£150,000 @ 8%). So, yes, the dates are important. As you don’t want to pay extra. 

 

In case, Alex misses out on the SDLT tax deadlines (being careless of the dates) he’ll also be paying a fine of £10,000. Let’s not be careless with the dates and understand that if you miss out on the key dates of SDLT tax, you may end up paying a lot more. Plus if you miss out on the tax deadline, you might even end up paying late fees.

 

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