SDLT Holiday in relation to Lease Extensions

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Lease Law
by Jade Wilson

What is the SDLT Holiday?

On 8th July 2020, the Chancellor announced that there will be a ‘stamp duty holiday’ with immediate effect until 31st March 2021. This ‘holiday’ effectively raised the stamp duty land tax threshold from £125,000 to £500,000, meaning that for main residences or only properties, no stamp duty will be payable on the first £500,000 of consideration and if the consideration for the transaction is less than £500,000, then no stamp duty will be payable.

If the consideration payable is in respect of an additional property which is not your main residence, then the additional stamp duty rate will be 3% for the first £500,000 of consideration, rather than the first £125,000 of consideration.

This holiday applies to any transaction that stamp duty is payable, which will include purchases of properties and will also apply to lease extension premiums. This could result in a maximum stamp duty saving of £15,000.

If the likely premium that you will pay for your lease extension is over £125,000 it is imperative that you commence your lease extension claim as soon as possible if you wish to take advantage of the stamp duty holiday, as it can often take over six months to complete a lease extension claim.

How much Stamp Duty is payable on my transaction?

The temporary stamp duty land tax rates are summarised below:-

Residential SDLT Rates

These rates will apply if the property that you are extending the lease on is your only property or is your main residence.

Band Previous SDLT rates New temporary SDLT rates
£0 – £125k 0% 0%
£125k – £250k 2% 0%
£250k – £500k 5% 0%
£500k – £925k 5% 5%
£925k – £1.5m 10% 10%
£1.5m + 12% 12%

 

Additional Property Rates

These rates will apply if the property that you are extending the lease on is not your only property or is not your main residence.

Band Previous SDLT rates New temporary SDLT rates
£0* – £125k 3% 3%
£125k – £250k 5% 3%
£250k – £500k 5% 3%
£500k – £925k 8% 8%
£925k – £1.5m 13% 13%
£1.5m + 15% 15%

 

*Transactions under £40,000 will not attract stamp duty.