The Budget 2010: Stamp Duty Land Tax (SDLT)
Alistair Darling has today made two major changes to SDLT, (stamp duty) on homes. The 1st which applies from midnight tonight is to give a temporary stamp duty 'holiday' to 'first time buyers' of property up to £250,000, and the 2nd to be introduced from 6 April 2011 is to increase the rate for property over £1 million to 5%.
Currently the rate is 1% for transactions over £125,000 to £250,000, 3% over £250,000 to £500,000, and then 4% for those over £500,000.
From 5 April 2011 a new rate will be therefore be introduced for transactions over £1 million. This will mean a bill of at least £50,000.
The Chancellor says the new stamp duty 'holiday' for 'first time buyers' will mean than 9 out of 10 first time buyers will not pay this tax.
The 'holiday' is introduced as a new stamp duty relief and is to apply for a 2 year period only starting on 25 March 2010 and ending on 24 March 2012. It applies only to wholly residential property where the price is more than £125,000 but not more than £250,000, and where the buyer or, if more than one all the buyers. :
• intend to occupy the property as their only or main residence, and
• have not previously acquired a freehold or leasehold interest in property in the UK (except a lease with less than 21 years to run) or an equivalent interest anywhere in the world
It should be stressed that if there is more than one buyer the relief cannot be claimed unless all the buyers can meet the qualifying conditions. i.e intend to occupy and are first time buyers.
Examples given by the Inland Revenue, of cases where the relief cannot be claimed include the following:
Q: I want to buy a house with my partner but one of us has previously owned a residential property. Can we claim the relief?
A. No. All of the buyers, when there are more than one, must be a first time buyer.
Q. I previously bought a house jointly with my spouse/partner. The partnership has broken up so can I be treated as a first time buyer?
A. No. Where the individual has previously acquired an interest in a residential property as a joint tenant or a tenant in common the individual is not a first time buyer.
Q. Is the relief available on transfers of interests in a home between partners?
A. Such a transfer normally requires a transfer from the existing owner to him/herself and the partner. Even if the partner is a first time buyer the existing owner is not. So the relief is not available.
Q. Can I get relief if I have previously owned an inherited property?
A. No. In this case a person will previously have acquired a major interest in a residential property.
Q. Can I claim the relief if I'm buying on behalf of my parents?
A. No. Relief is not available unless the first time buyer(s) are buying, for themselves, a property that they intend to use as their only or main residence.
The application of this relief will cause difficulties for property lawyers and confusion to buyers. We would also expect to see resentment from buyers who feel the relief is unjust or too narrow. It would have made more sense to simply lift the threshold to give greater eligibility and a more level playing field, or make it so the tax was graduated in the same way income tax is.
The current level of relief of up to £125,00 is far too low and it is disappointing that the temporary increase of the threshold to £175,000 which ended on 31.12.2009 was not extended. In particular a none married partner trying to buy out the other frequently now falls into the stamp duty bracket at this level due to the size of the mortgage, which was less likely when at £175,000. First time buyers who bought between £125,000 and £175,000, between 1 January and today, have the most reason to feel badly done by, as they will have missed out on both 'holidays'.
by Susan Ellis