Devolution and Property Taxes

by | Feb 13, 2018 | Blog, Tax rate and allowances

Devolution may be grabbing the headlines amid a background of Brexit uncertainty, but in reality, it’s been going on for decades.

Back in September 1997, Scotland and Wales held referendums to transfer certain tax powers from central government to the regions, while Northern Ireland followed suit a year later.

While these devolution deals saw the creation of various parliaments and assemblies, stamp duty land tax is one of the latest significant tax powers to be fully devolved from Westminster.

 

SCOTLAND

Despite the Scottish electorate rejecting full independence from the UK in 2014, the debate prior to the referendum was dominated by what powers Scotland should be able to decide for itself.

One of the earliest tax powers to be devolved from Westminster to Holyrood was stamp duty land tax, which was replaced by land and buildings transaction tax (LBTT) on 1 April 2015.

Exactly a year later the LBTT additional dwellings supplement came into force, which charges an extra 4% on purchases of second homes above £40,000.

A relief for first-time buyers is also available, which increases the residential nil rate band of LBTT to £175,000. From 1 April 2021, the availability of this relief will result in a reduction in tax of up to £600 for first-time buyers.

 

WALES

In 2018, Wales collected its first national tax in almost 800 years when it replaced stamp duty land tax with its own devolved land transaction tax (LTT).

The current LTT threshold is £250,000 for residential properties purchased at the main rates and £225,000 for non-residential land and properties.

From 27 July 2020 to 30 June 2021, homebuyers in Wales will only pay various rates of LTT if they fall into the following thresholds:

Price thresholdLTT rate
The portion up to and including £250,0000%
The portion over £250,000 up to and including £400,0005%
The portion over £400,000 up to and including £750,0007.5%
The portion over £750,000 up to and including £1,500,00010%
The portion over £1,500,00012%

 

After July 2021, the rates of LTT fall into the following thresholds:

Price thresholdLTT rate
The portion up to and including £180,0000%
The portion over £180,000 up to and including £250,0003.5%
The portion over £250,000 up to and including £400,0005%
The portion over £400,000 up to and including £750,0007.5%
The portion over £750,000 up to and including £1,500,00010%
The portion over £1,500,00012%

 

You will usually pay higher LTT rates when both of the following apply:

  • You buy a residential property worth £40,000 or more.
  • You already own 1 or more other properties.

Include any residential property that:

  • Is owned on behalf of children under the age of 18 (parents are treated as the owners, even if the property is held through a trust and they are not the trustees)
  • You have an interest in as the beneficiary of a trust.

ENGLAND & NORTHERN IRELAND

If you buy a property worth more than £125,000 in England or Northern Ireland, you will usually pay stamp duty on increasing portions of the price.

No tax is charged on properties worth less than £125,000, while a 2% charge is levied on the next £125,000 – so homes worth between £125,001 and £250,000.

You will pay 5% stamp duty on homes worth from £250,001 to £925,000, and 10% on any value above this up to £1.5 million.

Any house worth more than £1.5 million will attract a stamp duty charge of 12%.

 

Stamp Duty Holiday

In July 2020, Chancellor Rishi Sunak announced a temporary stamp duty holiday to stimulate market activity and support jobs that rely on the property market in light of the COVID-19 pandemic. With this, if you purchase a residential property between 8 July 2020 and 30 June 2021, you only pay SDLT on the amount above £500,000. These rates apply whether you are buying your first home or have owned property before.

You can use the table to work out the SDLT due:

Property or lease premium or transfer valueSDLT rate
Up to £500,000Zero
The next £425,000 (the portion from £500,001 to £925,000)5%
The next £575,000 (the portion from £925,001 to £1.5 million)10%
The remaining amount (the portion above £1.5 million)12%

Please note, from 8 July 2020 to 30 June 2021 the special rules for first time buyers are replaced by the reduced rates set out above.

Residential Rates on purchases from 1 July 2021 to 30 September 2021

As a way of phasing out the temporary stamp duty holiday, the Chancellor plans to reduce the SDLT zero rate relief from £500,000 to £250,000 effective from 1 July 2021 to 30 September 2021. In this time period, it will mean you only start to pay SDLT on the amount that you pay for the property above £250,000.

You can use the table to work out the SDLT due.

Property or lease premium or transfer valueSDLT rate
Up to £250,000zero
The next £675,000 (the portion from £250,001 to £925,000)5%
The next £575,000 (the portion from £925,001 to £1.5 million)10%
The remaining amount (the portion above £1.5 million)12%

Please note, from 1 July 2021 the special rules and rates for first time buyers apply, including first time buyers purchasing property through a shared ownership scheme.

If you’re buying your first home

You can claim a discount (relief) if you buy your first home before 8 July 2020 or from 1 July 2021. This means you’ll pay:

  • No SDLT up to £300,000.
  • 5% SDLT on the portion from £300,001 to £500,000.

You’re eligible if you and anyone else you’re buying with are first-time buyers.

If the price is over £500,000, you follow the rules for people who’ve bought a home before.

Higher rates for additional properties

The 3% higher rate for purchases of additional dwellings applies on top of temporary reduced rates above for the period 8 July 2020 to 30 June 2021 and 1 July 2021 to 30 September.

The following rates apply:

Higher Rates from 8 July 2020 to 30 June 2021

Property or lease premium or transfer valueSDLT rate
Up to £500,0003%
The next £425,000 (the portion from £500,001 to £925,000)8%
The next £575,000 (the portion from £925,001 to £1.5 million)13%
The remaining amount (the portion above £1.5 million)15%

 

Higher Rates from 1 July 2021 to 30 September 2021

Property or lease premium or transfer valueSDLT rate
Up to £250,0003%
The next £675,000 (the portion from £250,001 to £925,000)8%
The next £575,000 (the portion from £925,001 to £1.5 million)13%
The remaining amount (the portion above £1.5 million)15%

From 1 October 2021 the higher rates will then apply on top of the standard rates of SDLT.

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