31 May 2021
Summer 2021 is a very successful period for real estate purchase and sale due to Stamp Duty Land Tax (SDLT) holiday.
Due to COVID-19 and decreased activity in the real estate market reduced rates of SDLT are applying for residential properties purchased from 8 July 2020 and now to 30 September 2021 inclusive.
At the same time, one should remember about the new capital gains tax (CGT) reporting rules.
1. Reduced rates of SDLT: temporary measure
Reduced rates apply whether you are buying your first home or have owned property before1. As a general rule if relief from the 15% rate is available, SDLT at the higher rates (3%, 5%, 8%, 13% and 15%) apply depending on the chargeable consideration, provided that the conditions for the supplemental 3% SDLT charge apply. If those conditions are not satisfied the normal SDLT rates (0%, 2%, 5%, 10% and 12%)2 apply.
Reduced rates (0%, 5%, 10% and 12%) apply depending on the chargeable consideration too, however with other thresholds. The 3% higher rate for purchases of additional dwellings applies on top of revised rates above for the period 8 July 2020 to 30 June 2021.
Reduced rates with relief (from 8 July 2020 to 30 June 2021)
Property value | SDLT rate | With additional property |
Up to £500,000 | zero | 3% |
from £500,001 to £925,000 | 5% | 8% |
from £925,001 to £1.5 million | 10% | 13% |
above £1.5 million | 12% | 15% |
The same rates,however with other thresholds will be applied for the period 1 July 2021 to 30 September 20215. De facto this is an intermediate transition to standard rates.
Reduced rates with relief (from 1 July 2021 to 30 September 2021)
Property value | SDLT rate | With additional property |
Up to £250,000 | zero | 3% |
from £250,001 to £925,000 | 5% | 8% |
from £925,001 to £1.5 million | 10% | 13% |
above £1.5 million | 12% | 15% |
2. Reduced rates period
Reduced rates of SDLT apply until 30 September 2021 inclusive (with two different stages: from 8 July 2020 until 30 June 2021 and from 1 July 2021 to 30 September 2021).
On the 1 October 2021 the reduced rates shown in the following schedules will revert to the rates of SDLT that were in place prior to 8 July 2020. Therefore, many people want to take advantage of this opportunity this summer.
3. CGT reporting and payment
New rules require UK residents disposing of UK residential property to report and pay their CGT liability with 30 days of completion took effect. Previously there was reporting only after the end of the tax year via self-assessment
The new provisions primarily affect landlords, second-home owners. If CGT liability does not arise UK residents do not need to report.
4. Procedure
All taxpayers need to set up online a Property Account in order to proceed.
Taxpayers will get a username and password with which they can access their Property Account.
The alternative is to request a paper form. However, given the 30-day payment deadline, we can not recommend this way.
You need to report and pay their CGT liability with 30 days of completion took effect. It's possible to report by yourself or with help of your agent.
For those who, apart from the disposal of the property, would not be required to complete a self-assessment return. It's possible to correct any estimates entirely through the UK Property Reporting Service.
For landlords and others already in self-assessment for other reasons – the disposal is reported again as part of their self-assessment.
5. Penalty
There is a penalty-free ‘soft landing’ period, which is applied for disposals in the first 3 months of the 2020/21 tax year. Who miss the deadline after that time will liable to a £100 fine.
Summary
With new reduced rates SDLT the real estate market is refreshed and revitalized. However, all taxpayers need to be mindful of correct using SDLT rates and new CGT reports and payments, and be aware of the challenges associated with subsequent annual self-assessment reports.
For further information on any of the points above contact
Mikita Makayou at mikita@lexefiscal.com, or
Dr. Frank at clifford.frank@lexefiscal.com.