USA The Growth Plan: stamp duty land tax
The starting nil rate band of stamp duty land tax (SDLT) has been doubled to cover the first £250,000 of purchase price, effective immediately, to stimulate the residential property market. Rather than being a temporary rates ‘holiday’, similar to previous measures in 2021, this rate reduction is intended to be permanent. This follows a slowing down of the UK housing market due to high levels of inflation and rising interest rates. Higher volumes of housing transactions can also have a positive effect on related sectors, such as construction and estate agency and therefore contribute to supporting related businesses and the wider economy.
A permanent rate cut should also prevent the pricing volatility we saw at the time of the end of the previous stamp duty holiday. Whilst the Chancellor has announced the reduced rates will be available immediately, it is unclear at present if the reduced rates will be available to purchasers who have exchanged but not yet completed on their property purchases.
First time buyer’s relief from SDLT has also been extended, to cover the first £425,000 of purchase price. The threshold was previously £300,000, as it had been since the introduction of the relief in 2017. The relief has historically been available where the total value of property purchased was £500,000 or less, but today’s announcement increased that cap to £625,000. First time buyers eligible for the relief will be liable to the standard rate of 5% on the portion of purchase price that exceeds the extended nil rate band.
The announced measures will reduce the SDLT liability for all purchases of a single property in England and Northern Ireland by up to £2,500, with first time buyers able to access up to £11,250 of relief in total. It should be noted that SDLT only applies to purchases of land in England and Northern Ireland, and this rates reduction does not apply to purchases of property in Scotland and Wales, which are liable to different stamp taxes instead.
During the last time the Government temporarily increased the SDLT thresholds, the application of Multiple Dwellings Relief (MDR) became more attractive. We are awaiting the response to the consultation on the treatment of mixed-use property and the application of MDR. Without any comment on this today, we may have to wait until the Budget to understand the full impact of these changes.
