Georgina West, Partner in EY Stamp Taxes Group, comments on the extension of Stamp Duty Land Tax (SDLT):
“The Chancellor has bowed to pressure to extend the SDLT holiday until 1 October 2021 (when the tapering period will end). The extension will mean that (until 1 July 2021) the first £500,000 of the purchase price of a property situated in England or Northern Ireland will not be subject to SDLT. The nil rate band will reduce to £250,000 from 1 July 2021 until 1 October 2021 (and, from 1 October 2021, the nil rate band will return to its original level of £125,000). Albeit that for so called second homeowners buying residential properties in England and Northern Ireland these brackets will still be subject to the supplemental 3%. It is not clear at this stage whether the Scottish or Welsh Governments will follow suit (as they did previously) and extend their version of the SDLT holiday.
“Whilst we understand that the initial extension of the SDLT holiday has come at a cost to the Treasury (with year to date tax revenue figures down 36% for residential transactions) it must be appreciated that the number of residential transactions are also down (by 14% on year to date figures). These figures are also a blunt tool to measure the true cost to the Treasury of the SDLT holiday since these figures only reflect the headline amount of revenue that may have been lost. The figures do not reflect the positive impact it would have had on sections of the economy which surround house sales (such as conveyancers, surveyors, removal men, builders etc) during the pandemic, helping to support valuable employment (the housing sector supporting 500,000 jobs).
“The Chancellor has also listened to concerns about replacing one cliff edge with another by phasing out the SDLT holiday under a graduated scheme (with the nil rate band being £250,000 from 1 July 2021 and returning to £125,000 on 1 October 2021), the nil rate band will return to its original level of £125,000) as this may help to reduce clamours for another extension later down the road.
“As of 1 April 2021, foreign buyers (acquiring residential property in England and Northern Ireland) will also suffer an additional 2% stamp duty. This will take the highest rate of stamp duty on residential property to a whopping 17% ensuring that UK stamp duty continues to have one of the highest duties of its kind in the world. Although, we understand that many estate agents do not think this will act as a significant barrier to such investors (given the value of Sterling and the draw of the UK property market as a place of investment for overseas buyers).”