Purchasers of residential properties across the UK have been enjoying a limited reduction in land tax since July 2020, as the entry thresholds were increased as follows:
- SDLT (England and Northern Ireland) starts at £500,000 instead of £125,000
- LTT (Wales) starts at £250,000 instead of £180,000
- LBTT (Scotland) starts at £250,000 instead of £145,000
All those entry thresholds are due to revert to the normal levels from 1 April 2021. If you are thinking of buying a new home, you need to complete the deal before that date to take advantage of the land tax “holiday”.
However, for purchasers of homes in Wales it is already too late for property investors, as the Welsh Government increased the surcharge rate from 3% to 4% on 22 December 2020. As in other parts of the UK, the LTT surcharge applies to the entire consideration where the buyer is a company, or the property will not be used as the purchaser’s main home.
In fact, the Welsh Government cannily restricted the LTT holiday rates to those who are purchasing their main home. Where the surcharge applies, the starting threshold for the main rates of LTT on residential properties is £180,000.
Where you are living overseas and are seeking to purchase a home in England or Northern Ireland, you need to be aware of the additional SDLT surcharge of 2% which will apply from 1 April 2021. This surcharge will apply on top of the current 3% surcharge for second homes, where any of the joint purchasers is a non-resident person, ie an individual, company, trust or partnership at the time of the purchase.
Individuals who are returning to the UK could be caught by this new surcharge as the definition of UK tax residence for SDLT is different from that in the Statutory Residence Test.
Written by the Tax Advice Network