Lifting The Threshold For Stamp Duty Land Tax

The Chancellor announced a lifting of the threshold for Stamp Duty Land Tax (“SDLT”) to £500,000 for residential property transactions taking place between today and 31 March 2021.

This means that no SDLT will be payable on homes costing up to £500,000 when it is the main residence of the buyer. The purchase of additional residential properties (holiday homes or buy-to-let properties) or the purchase of residential properties by companies will still be subject to the 3% SDLT surcharge. The purchase of additional residential properties will be subject to a SDLT rate of 3% on the first £500,000 paid for the property. The normal rates of SDLT will apply to any part of the price paid above £500,000.

As SDLT only applies in England and Northern Ireland, it will be up to the Welsh Government to decide what happens to the rates of Land Transaction Tax (“LTT”) on property transactions in Wales. At present the LTT threshold for residential property is £180,000 and this applies to 62% of residential property transactions in Wales in the year to March 2020 (according to the Welsh Revenue Authority annual report on LTT statistics published on 7 July 2020). To have the same effect as in England (to remove 90% of residential transactions from SDLT), the Welsh Government would have to raise the LTT threshold to around £300,000 before LTT became payable.

The LLT statistics showed a substantial drop in LTT receipts for April and May 2020. Although LTT accounted for around £235m of Welsh Government tax receipts in 2019/20 and forms a very small part of the overall tax receipts, any shortfall in LTT receipts will have important budget implications for Welsh Government.

Liz Ganderton, Property Partner, said:

“The SDLT holiday will be a very welcome boost for the housing market, for buyers and house builders alike, and represent a major tax saving for house buyers.”

Andrew Evans, Tax Partner, added:

“It will be interesting to see the reaction from Welsh Government and their plans to boost the welsh property market. It is a real example of devolution in practice”.