Stamp Duty Land Tax: Grab Those Savings!

In something of a Robin Hood move, the recent Budget saw Chancellor Alistair Darling take from those at one end of the property ladder to give to those at the other. Sarah Bradford reveals who the winners and losers are in the Stamp Duty Land Tax stakes.

The winners...
...First time buyers! The Chancellor announced that legislation would be included in the 2010 Finance Bill to raise the Stamp Duty Land Tax (SDLT) threshold for first-time buyers to £250,000. The revised threshold applies to purchases of residential property where the purchaser(s) are first-time buyers who intend to occupy the property as their main home.

The revised threshold applies where completion takes place on or after 25 March 2010 and before 25 March 2012. For purchasers other than first-time buyers, the threshold remains at £125,000 (or at £150,000 for purchases of property in a designated disadvantaged area).

This provides first-time buyers with a two-year window in which to take advantage of the higher threshold. However, it should be noted that for the higher threshold to apply, certain conditions must be met. The first is that all purchasers are first-time buyers.

This means that where a property is brought jointly, the higher threshold will apply only if all the purchasers are first-time buyers. The second condition is that the purchasers must intend to live in the property as their main residence.

This means that the higher threshold is not available for buy-to-let properties, even if the purchaser is a first-time buyer, although, such a purchaser could buy the property initially as a home and let it at a later date and enjoy the raised threshold.

The Losers!
To give this relief to first-time buyers, money must be raised elsewhere and the SDLT losers in this Budget were those intending to buy residential property costing more than £ 1 million. Legislation is also to be introduced in the 2010 Finance Bill to raise the rate of SDLT to 5% for purchases of residential property where the consideration exceeds £1 million.

Currently, the highest rate of SDLT payable in respect of residential property is 4% where the consideration exceeds £500,000. However, the higher rate does not take effect until next year – applying to residential purchases where the completion date is on or after 6 April 2011.

This provides those thinking of purchasing a £1 million plus property a year in which to complete.

Where completion takes place before 6 April 2011, SDLT on a £1.2 million property is £48,000 (£1.2 million @ 4%). Delaying completion until after 6 April 2010 will increase the SDLT rate to 5% and the associated SDLT on such a property to £60,000. The increased rate translates to additional SDLT of £12,000 on a £1.2 million property. The more expensive the property, the more SDLT is payable.