Temporary increase to Stamp Duty Land Tax nil rate band for residential properties
Updated 25 March 2021
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Who is likely to be affected
Purchasers of residential property in England and Northern Ireland.
General description of the measure
This measure temporarily increases the amount that a purchaser can pay for residential property before they pay Stamp Duty Land Tax (SDLT) while maintaining the higher rate of 3% on additional dwellings.
It means that all individual purchasers of residential property who complete or substantially perform their purchase between 8 July 2020 and 31 March 2021 will pay less or no SDLT.
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
As a result of the coronavirus (Covid-19) lockdown, the housing market was largely put on hold between 26 March and 13 May, and since then there has continued to be reduced activity in the UK housing market when compared with the period before lockdown.
This measure was announced by the Chancellor on 8 July 2020.
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 with an effective date (usually the date of completion) between 8 July 2020 and 31 March 2021 (the ‘temporary relief period’).
This measure does not apply to Scotland or Wales who operate their own land transactions taxes.
Current law
The main SDLT legislation is at Part 4 of the Finance Act 2003.
The residential rates for SDLT applicable to purchases other than higher rates purchases can be found at Table A of section 55(1B) of the Act:
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £125,000 | 0% |
| So much as exceeds £125,000 but does not exceed £250,000 | 2% |
| 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% |
The rates for purchases where rent is taxed can be found at Table A: Residential in paragraph 2(3) of Schedule 5 to the Act:
| Rate bands | Percentage |
|---|---|
| £0 to £125,000 | 0% |
| Over £125,000 | 1% |
The rates for purchases subject to the higher rates can be found in Table A: Residential at paragraph 1(2) of Schedule 4ZA of the Act:
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £125,000 | 3% |
| So much as exceeds £125,000 but does not exceed £250,000 | 5% |
| 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% |
Section 57B and Schedule 6ZA make provisions for qualifying first time buyers to pay tax under rates and bands set out at paragraph 4 of Schedule 6ZA:
| Relevant consideration | Percentage |
|---|---|
| So much as does not exceed £300,000 | 0% |
| Any remainder (so far as not exceeding £500,000) | 5% |
Section 44 applies where a contract for a purchase is subsequently completed by a conveyance. Section 44 ensures that the tax is recalculated when there is a change to a contract between substantial performance of the contract and completion of the contract. When there is such a change, tax is recalculated under the rates and bands prevailing at the time of completion.
Proposed revisions
Legislation will be introduced in the Stamp Duty Land Tax (Temporary Relief) Bill to amend:
Table A of section 55(1B) (for purchases other than higher rates purchases) of the Act as follows:
| 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) as follows:
| Rate bands | Percentage |
|---|---|
| £0 to £500,000 | 0% |
| Over £500,000 | 1% |
Table A at paragraph 1 of Schedule 4ZA (for higher rates purchases) as follows:
| 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 will be disapplied during the temporary relief period.
Section 44 will be amended to ensure that no additional tax will be due when a contract is completed following substantial performance during the 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 temporary 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 |
|---|---|---|---|---|---|
| -2295 | -1040 | +5 | negligible | +5 | negligible |
These figures are set out in Table 1.1 of Spending Review 2020 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spending Review 2020.
Economic impact
The Office for Budget Responsibility will set out their judgement on any macroeconomic impacts at the next fiscal event.
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 ongoing 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, at an estimated cost of up to £750,000.
Other impacts
Other impacts have been considered and none have been identified.
European Convention on Human Rights
The Chancellor of the Exchequer has made the following statement under section 19(1)(a) of the Human Rights Act 1998:
In my view the provisions of the Stamp Duty Land Tax (Temporary Relief) Bill are compatible with the Convention rights.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, please contact the HMRC SDLT Helpline.