England, Wales, Scotland & Northern Ireland
UK Housing News
Stamp Duty’s Five Exemptions: Pressure mounts to reform SDLT ahead of Spring Budget
New data reveals that just 14% of homeowners over 55 are considering downsizing – with the cost of stamp duty amongst the most significant barriers
Cornerstone Tax, the UK’s leading property tax advisory, outlines the five stamp duty exemptions that often fall beneath the radar
Research by Pegasus reveals that only 14% of homeowners aged over 55 are considering downsizing, with the majority preferring to stay in their current homes post-retirement, especially among those aged 71-75. Concerns about the cost of stamp duty and the hassle of moving are major barriers to downsizing, according to 35% and 37% of respondents, respectively. David Hannah, Chairman of Cornerstone Tax, suggests targeted reform of stamp duty to boost housing transactions.
MPs are urging the Chancellor to prioritise stamp duty reform ahead of the Spring Statement on March 6th, proposing incentives such as cuts for energy-efficient homes and exemptions for elderly homeowners. Declining transaction numbers have led to reduced SDLT revenue, indicating a concerning trend. Hannah suggests focusing on stimulating the lower-end property market by reassessing stamp duty thresholds, potentially encouraging movement and revitalising the housing market.
Stamp Duty Land Tax (SDLT) is levied on property purchases in England and Northern Ireland, with thresholds determining the amount owed. Properties priced up to £250,000 (or £425,000 for first-time buyers) incur no SDLT, while rates of 5% apply to main residences priced between £250,001 and £925,000, and 8% for additional properties in that range. The top rates are now 12% for main residences and 17% for foreign buyers of second homes. Scotland (LBTT) and Wales (LTT) have their own tax structures. Amidst a challenging cost of living situation, David Hannah, Group Chairman of Cornerstone Tax, advises seeking expert guidance to avoid overpaying. Cornerstone Tax notes five frequently overlooked SDLT reliefs and exemptions that could help taxpayers save thousands.
Pegasus
MPs are urging the Chancellor to prioritise stamp duty reform ahead of the Spring Statement on March 6th, proposing incentives such as cuts for energy-efficient homes and exemptions for elderly homeowners.
Exemption #1: Buy-to-let Landlords
Considering incorporation? It's worth noting that 50% of portfolio incorporations are exempt from paying SDLT or capital gains tax. However, many miss out on these exemptions by opting for the cheapest legal and accounting advisors, who may not be well-versed in the intricacies of stamp duty and CGT rules. This oversight can lead to costly mistakes and may deter landlords from incorporating due to misunderstandings or poor advice.
Exemption #2: Developers
If you're purchasing for occupation, investment, or development, you might be eligible to save up to £87,000 on SDLT through an often-overlooked relief called Multiple Dwellings Relief. This relief involves paying stamp duty based on the average price of each dwelling in the transaction, potentially saving you between £10,000 and £87,000 on a property with a single annex, depending on its price.
Exemption #3: Property traders
Many property deals can avoid SDLT through four specific reliefs tailored for "Flippers." These include purchases to restore a broken chain, acquisitions from the personal representatives of a deceased person, part exchange properties from those buying a "new" home, and purchases from individuals relocating for employment. All of these transactions qualify for a 100% SDLT relief, subject only to certain limits on refurbishment expenditure and the area of land acquired.
Exemption #4: Pensions
If you have a SIPP or SSAS pension, transferring commercial premises into them has been a common strategy for business owners, offering tax efficiency and potential for asset appreciation and rental income growth. However, Stamp Duty has been erroneously paid by pension providers in many cases where no duty is due. HMRC has confirmed this in certain circumstances. Cornerstone’s strategic partners have successfully recovered over 150 overpayments, averaging around £26,000 each. With this error persisting since 2007, projections suggest up to 30,000 pensions are affected, potentially entitling pensioners to upwards of £6 billion in stamp duty refunds.
Exemption #5: Mixed-use property
In very many cases, people are buying homes that have features that mean they are not wholly residential and are often unaware that as a result they are not liable to pay the full residential rate of stamp duty but rather the lower mixed-use or commercial rate 5%.
The benefits don't stop there, because in addition to not paying the residential rate these mixed-use properties also don't pay any of the surcharges for second homes 3% or by non-residents 2%.
This means that on the most expensive properties being able to successfully claim could save you 12% of the purchase price.
David Hannah, Group Chairman of Cornerstone Tax commented:
“By conducting a thorough analysis, seeking professional advice, and understanding the applicable regulations, you can minimise the risk of overpaying SDLT. However, if an overpayment does occur, initiating a review promptly allows you to rectify the situation, gather evidence, and pursue appropriate actions to claim a refund or make adjustments as required.”
David Hannah, Group Chairman
