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SDLT saving opportunities – residential rate reduction

The recent reduction in stamp duty land tax (SDLT) to 0% on the first £500,000 of the purchase price of residential property has been welcome news for many – see our previous blog here. There are planning opportunities for others who can also benefit from the temporarily lower SDLT rates before they revert to the previous rates on 1 April 2021:

  • For those buying an additional property and not replacing their own residence, the surcharged rate remains but this is only at 3% up to £500,000. This may be welcome news to those purchasing a second home or a buy-to-let
  • The surcharged rates (3%) are also applicable to company purchasers so there is a limited period of opportunity for companies to purchase residential property at lower SDLT rates
  • For those not operating a partnership business already (where the SDLT may be reduced to nil), this may provide another opportunity to consider incorporation, particularly given the interest restrictions on residential mortgages. From April 2020, interest on residential mortgages is now limited to a 20% tax reducer which is resulting in many having a higher marginal tax rate
  • How many dwellings are being purchased? A claim for multiple dwellings relief could be considered whereby the average price per dwelling is used. With the first band now extending to £500,000, this could enable a far higher proportion of the consideration to be paid at the 1% rate
  • The 0% rate extension only applies to residential properties. Take advice on whether a purchase is residential or mixed use as this can have a significant impact on the SDLT payable. This can often be judgemental and there are a number of factors to consider
  • Where spouses or civil partners wish to transfer ownership of property (or part of it) with a mortgage to the other then there is now an opportunity to do so with little or no SDLT payable.  This may enable more tax-efficient ownership, for example by moving property to a spouse with a lower marginal tax rate
  • This may be a good time to consider any change in property ownership with capital gains tax rates likely to rise in the future, and inheritance tax becoming an increasing burden on property owners

If you have any questions about this and would like to speak to myself or one of our team for further clarity, please get in touch – we’ll be more than happy to help.

FEATURING: Heather Britton
Heather specialises in providing tax advice to companies and their directors/shareholders, as well as unincorporated businesses and property owners. She enjoys providing practical tax solutions,… read more
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