(3 Minute Read)
The holiday that could save you money!
What is it?
In July 2020 the Chancellor, our mate Rishi Sunak, announced an SDLT holiday.
This is good news for people buying property, but also for spouses transferring property between themselves.
Normally, if spouses want to transfer property between themselves then this is not a problem for taxes such as Capital Gains Tax.
However, where there is a mortgage, there can be issues with Stamp Duty Land Tax (SDLT). This is because SDLT is a tax based on ‘consideration’ and taking on a mortgage is a form of ‘consideration’.
Holiday? I’ll bring my trunks!
The holiday announced will last until the 31st March 2021, and will cover the first £500,000 of consideration for residential properties.
This holiday means that you could save up to £15,000 when buying a house or transferring to a partner, and the Chancellor said it would reduce stamp duty by an average of £4,500.
This saving is a substantial amount, and this opportunity shouldn’t be missed if you’re thinking of transferring, or buying, property.
Show me the money!
David and Victoria are married. David pays tax at 45%, and owns a residential property. Victoria has no other earnings.
The property has a £600,000 mortgage attached to it, and rental profits of £20,000 per year, meaning David will pay £9,000 per year in income tax.
Because Victoria has no other income, she would only pay tax of £1,600.
When the property is transferred to Victoria the mortgage is £500,000. Normally she would therefore have to pay SDLT of £15,000 but thanks to Rishi Sunak’s holiday she doesn’t have to pay anything!
Why can’t holidays last forever?
Although there is a debate due in Parliament on extending the holiday, this should not be taken for granted, and it would be a shame to wait too long and cost yourself thousands in tax.
Kind regards Ilyas