I welcomed the temporary cut to Stamp Duty Land Tax (SDLT) for home buyers across England and Northern Ireland until the end of June 2021.
The temporary SDLT cut increased the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This applied from 8 July 2020 until 30 June 2021 and cut the tax due for everyone who would have paid SDLT. As announced at the Budget, from 1 July 2021 until 30 September 2021, the nil rate band was £250,000 with the nil rate band returned to its standard amount of £125,000 from 1 October 2021.
This measure was a crucial intervention to ensure medium-term confidence in the property market and maintain the growing momentum since the easing of lockdown and I welcome that the end date was pushed back from 31 March to 30 June 2021.
I am confident that this action to support the housing market has protected and created jobs. In England and Wales, an estimated 240,000 people are directly employed by housebuilders and their contractors, and between 500,000 and 700,000 employees are indirectly supported in the supply chain. Moving to a new house also boosts the economy, with estimates suggesting that doing so drives additional spending worth about 5 per cent of the house's value.
Under this temporary scheme it would not have been possible to create an exclusion for holiday homes, this would have necessitated significant oversight of transactions and demanded substantial public resources. The purpose of the scheme was to support the housing market and prevent dangerous fluctuations in the market, and the blanket implementation of the duty holiday was key to achieving this goal. Please be assured that more permanent tax structures are carefully considered to ensure that in aggregate everyone pays their fair share towards our vital public services.
I also understand concerns regarding the backlog of transactions and the impact this could have on people whose purchases may have completed after 30 June and I will alert my ministerial colleagues to the strength of feeling on this matter.
Regarding backdating, I have spoken with colleagues at the Treasury to raise the concerns raised. I am not aware of any plans to backdate this measure, and my understanding is that the timing of its implementation was subject to significant consideration. I understand this must be frustrating, so please be assured that I have raised this with Ministers.
Moreover, a suggestion of a stamp duty lifetime amount is certainly an interesting one, please be assured that I have passed the comments raised on to my colleagues at the Treasury. I know that all taxation is kept under review, and that any changes would undergo due consideration as part of the normal Budget process. However, I feel that the SDLT holiday announced by the Chancellor for England and Northern Ireland was a sufficient and timely change, and that any further changes to the SLDT system are unlikely to be considered until the next budget process. I would also add that in normal times SDLT is a vital source of revenue for the Treasury, revenue which is used to improve housing opportunities across the country and to tackle homelessness.
I am also not aware of any plans to introduce an SDLT exemption for pensioners. However, I shall be following developments closely, and I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue. I understand that the Government keeps all taxes under review, and that any decision to modify our tax regime is a matter for the Treasury and careful consideration will be given to any proposed amendments to taxation. Any changes to taxation would be announced at a future Budget.
In my understanding, the Stamp Duty Land Tax cut would have also applied for the purchase of an empty plot as the tax applies to acquisitions of an interest in land. You may be interested to know that some self-builders may be eligible for relief or exemption from the Community Infrastructure Levy. You can also apply for a VAT refund on materials and services if you build your own, which you can find out more about here: https://www.gov.uk/vat-building-new-home.
In addition, a 3 per cent surcharge on top of SDLT rates exists when buying a new residential property means you will own more than one. If the property being purchased is replacing your main residence and that residence has already been sold, the 3 per cent surcharge will not be applied. If you have not sold your main residence on the day you complete purchase of your new residence and do pay higher rates, then you will be able to apply for a refund if what was previously your main residence is sold within thirty-six months.
For separating couples, it is my understanding that the 3 per cent surcharge is subject to exemptions through the use of separation agreements and property adjustment orders. When purchasing property in the context of separation, divorce or dissolution of a civil partnership, it is important to seek professional legal advice to understand the consequentials for SDLT and additional rates.
Moreover, as in understand it, joint owners who are unmarried and not in a civil partnership when they transfer an interest in land or property from one joint owner to another may have to pay SDLT.
SDLT is not payable if 2 or more people jointly own property (as joint tenants or tenants in common) and you divide it physically and equally and own each part separately. However, if one person takes a bigger share, or all of the other’s share, and pays cash or some other consideration in exchange HMRC must be informed.
Joint owners including unmarried couples who are splitting up may agree that just one of them will take over ownership of a property they bought together, including any outstanding mortgage. In this case the person taking ownership will pay SDLT on the total chargeable consideration of either or both of any cash payment that one of the couple makes to the other for their share, and the proportion of the outstanding mortgage that belongs to the share of the property being transferred, if either or both of these exceed the SDLT threshold.
Finally, since 1 April 2021, SDLT for purchasers of residential property in England and Northern Ireland who are not resident in the United Kingdom is 2 percentage points higher than those that apply to purchases made by UK residents, and applies to purchases of both freehold and leasehold property as well as increasing SDLT payable on rents on the grant of a new lease.