In July last year, the Government announced a temporary increase in the residential stamp duty land tax (SDLT) threshold to £500,000. The higher threshold applies where completion takes place between 8 July 2020 and 31 March 2021. From 1 April 2021, the threshold will revert to £125,000, with a higher threshold of £300,000 applying to first-time buyers where the price of the property is not more than £500,000.
Higher (but different) thresholds also apply in Scotland for land and buildings transactions tax (LBTT) and in Wales for land transaction tax purposes (LTT). These are not discussed here.
SDLT supplement
A SDLT supplement of 3% applies where a buyer purchases a second or subsequent property for £40,000 or more, such as a buy-to-let property or a holiday home. The supplement does not apply where the buyer sells their main residence and buys a new home, even if they also own other properties.
Where the higher residential threshold applies, the 3% supplement applies to the rates as reduced during that period. Consequently, those buying second homes or investment properties should look to complete by 31 March 2021; failure to do so may prove costly.
The rates
The SDLT residential rates applying between 8 July 2020 and 31 March 2021, and those applying from 1 April 2021 onwards, are shown in the tables below.
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% |
- First time buyers buying a property costing not more than £500,000 pay SDLT at 0% on the first £300,000 and 2% on the balance.
The cost of missing the deadline
Failing to complete by 31 March 2021 can be costly as the following example shows.
Example
Ted is in the process of buying an investment property for £400,000. He already owns a main residence and two investment properties, so the supplement applies.
If completion takes place on or before 31 March 2021, he will pay SDLT of £12,000 (£400,000 @ 3%). However, if completion takes place on or after 1 April 2021, the SDLT bill will be £22,000 ((£125,000 @ 3%) + (£125,000 @ 5%) + (£150,000 @ 8%)). Missing the deadline will cost Ted £10,000.
Remember, the key date is the date of completion, not the date of exchange.
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