Stamp Duty Land Tax and The Budget 2010

Mr Darling today announced alterations to the Stamp Duty thresholds that will benefit the first time buyer and at the same time increase the amount payable by the wealthy when they buy luxury homes.

First Time Buyers

Stamp Duty Land Tax (SDLT) was previously payable when anyone purchased property over £125,000 at a rate of at least 1%.  This has now changed so that zero SDLT is payable on any purchase where the purchase price is less than £250,000 and the purchasers are first time buyers who intend to occupy as their only or main home.  SDLT remains payable at 3% above £250,000 and 4% payable above £500,000 irrespective of who is buying.

This is set to be in force until 25 March 2012.  It remains to be seen how the government ensures that first time buyers are in fact first time buyers, but we expect guidance shortly.

Wealthy Purchasers

Under Mr Darling's proposals today, those purchasers buying a property for over £1 million after 6 April 2011 will pay SDLT at a rate of 5%.  This will obviously be a concern to the wealthier who are likely to have also been hit with the latest 50% income tax.

Examples

1.  23 year old first time buyer buys a flat in Weymouth for £190,000.  Before 25 March 2010 he pays £1900 to HMRC in SDLT.  After 25 March 2010 he pays no SDLT but still needs to file a return.

2.  55 year old investment banker buys a penthouse apartment in Sandbanks for £1.2 million.  Before 6 April 2011 he pays £48,000 to HMRC in SDLT.  After 6 April 2011  he pays £60,000 to the HMRC in SDLT.

3.  35 year old teacher buys a family home in Dorchester for £325,000.  Before 25 March 2010 she pays £9,750 in SDLT.  After 25 March 2010 she pays exactly the same SDLT.

Pengillys LLP can advise you on the latest developments in tax law and potential avenues of mitigating tax.