Extension of the temporary increase to the Stamp Duty Land Tax nil rate band for residential properties
Published 3 March 2021
© Crown copyright 2021
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/extension-of-the-temporary-increase-to-the-stamp-duty-land-tax-nil-rate-band-for-residential-properties/extension-of-the-temporary-increase-to-the-stamp-duty-land-tax-nil-rate-band-for-residential-properties
Who is likely to be affected
Purchasers of residential property in England and Northern Ireland.
General description of the measure
This measure introduces a staged withdrawal of the temporary increase to the amount that a purchaser can pay for residential property before they pay Stamp Duty Land Tax (SDLT), by:
- extending to 30 June 2021 the nil rate band of £500,000, which was due to end on 31 March 2021
- introducing a nil rate band of £250,000 for the period 1 July 2021 to 30 September 2021
Policy objective
This measure is part of the government’s strategy to maintain confidence in the housing market following the coronavirus (Covid-19) pandemic.
Background to the measure
Due to the coronavirus pandemic, the housing market was largely put on hold between 26 March 2020 and 13 May 2020, and after that period there continued to be reduced activity in the UK housing market when compared with the period before lockdown. In response to this, on 8 July 2020 the Chancellor announced a temporary increase to the amount a purchaser could pay for residential property before SDLT was due, from £125,000 to £500,000, for the period 8 July 2020 to 31 March 2021.
No consultation has been held as this is a temporary change which is wholly relieving. It would not be in the public interest to consult, as this may have an adverse effect on the housing market if buyers delayed purchases during the consultation period.
Detailed proposal
Operative date
This measure will apply to transactions in England and Northern Ireland with an effective date (usually the date of completion) between 1 April 2021 and 30 September 2021.
This measure does not apply to Scotland or Wales who operate their own land transaction taxes.
Current law
The main SDLT legislation is at Part 4 of the Finance Act 2003.
The temporary increase from 8 July 2020 to 31 March 2021 to the amount that a purchaser can pay for residential property before they pay SDLT is in The Stamp Duty Land Tax (Temporary Relief) Act 2020.
Proposed revisions
Legislation will be introduced in the Finance Bill to amend The Stamp Duty Land Tax (Temporary Relief) Act 2020 which in turn will amend the Finance Act 2003.
Initial temporary relief period
The legislation will have the effect that the existing temporary period of reduced rates of SDLT will end on 30 June 2021 instead of 31 March 2021, and will be described in the legislation as ‘the initial temporary relief period’. For that period the Finance Act 2003 is amended as follows:
Table A of section 55(1B) (for purchases other than higher rates purchases):
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £500,000 | 0% |
| So much as exceeds £500,000 but does not exceed £925,000 | 5% |
| So much as exceeds £925,000 but does not exceed £1,500,000 | 10% |
| The remainder (if any) | 12% |
Table A at paragraph 2(3) of Schedule 5 (for rent):
| Rate bands | Percentage |
|---|---|
| £0 to £500,000 | 0% |
| Over £500,000 | 1% |
Table A at paragraph 1 of Schedule 4ZA (for higher rates purchases):
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £500,000 | 3% |
| So much as exceeds £500,000 but does not exceed £925,000 | 8% |
| So much as exceeds £925,000 but does not exceed £1,500,000 | 13% |
| The remainder (if any) | 15% |
The provisions applicable to first time buyers in section 57B and Schedule 6ZA are disapplied during the initial temporary relief period as the extended nil rate band applies in all cases where first time buyers’ relief would normally apply.
Section 44 will be amended to make sure that no additional tax will be due when a contract is completed following substantial performance during the initial temporary relief period provided the only reason for additional tax becoming due under section 44 is that completion has occurred after the end of the initial temporary relief period.
Further temporary relief period
The period 1 July 2021 to 30 September 2021 will be ‘the further temporary relief period’ and the Finance Act 2003 will be amended as follows:
Table A of section 55(1B) (for purchases other than higher rates purchases):
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £250,000 | 0% |
| So much as exceeds £250,000 but does not exceed £925,000 | 5% |
| So much as exceeds £925,000 but does not exceed £1,500,000 | 10% |
| The remainder (if any) | 12% |
Table A at paragraph 2(3) of Schedule 5 (for rent):
| Rate bands | Percentage |
|---|---|
| £0 to £250,000 | 0% |
| Over £250,000 | 1% |
Table A at paragraph 1 of Schedule 4ZA (for higher rates purchases):
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £250,000 | 3% |
| So much as exceeds £250,000 but does not exceed £925,000 | 8% |
| So much as exceeds £925,000 but does not exceed £1,500,000 | 13% |
| The remainder (if any) | 15% |
The provisions applicable to first time buyers in section 57B and Schedule 6ZA are not disapplied during the further temporary relief period so that first time buyers can claim relief under those provisions.
Section 44 will be amended to make sure that no additional tax will be due when a contract is completed following substantial performance during the further temporary relief period provided the only reason for additional tax becoming due under section 44 is that completion has occurred after the end of the further temporary relief period.
Summary of impacts
Exchequer impact (£million)
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| -255 | -1,350 | negligible | negligible | -5 | nil |
These figures are set out in Table 2.1 of Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2021.
Economic impact
Changes to SDLT rates are shown to impact housing market activity. Based on HMRC analysis, the OBR assume that cuts in the rate of SDLT boosts housing transactions and increases house prices. Based on this and accounting for possible forestalling behaviour, the extension would likely lead to a net increase in transactions across the forecast period. Through increasing transactions, the SDLT extension will also boost residential investment in the UK and increase house prices.
Impact on individuals, households and families
Individuals and their families buying a residential property are expected to be positively impacted by a reduction of SDLT as it will make it easier to buy a home. Overall there is expected to be no impact on family formation, stability or breakdown as this proposal could make it easier for families to purchase a family home when they were previously unable to, and to stay together as a family unit.
Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.
Equalities impacts
The benefits of this measure will fall to those who are buying residential property, which is expected to be in line with the existing distribution of home ownership.
This measure is not expected to impact on this distribution for any protected group.
Impact on business including civil society organisations
This proposal is expected to have a negligible impact on approximately 40,000 businesses associated with the property and conveyancing industry.
One-off costs will include familiarisation with the change and could also include making minor IT and software changes to take account of the change. There is expected to be no continuing costs. This measure is not expected to impact civil society.
Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.
Operational impact (£million) (HMRC or other)
HMRC will need to make changes to IT systems and the online calculator on GOV.UK to support this change. HMRC will not require additional funding for these changes.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact: stamptaxes.budgetfinancebill@hmrc.gov.uk.