UK & Europe
You may have already heard about the Chancellor's announcements to stimulate the economy and save jobs. But we want to give you some more of the detail behind the headlines on the two key tax announcements.
These are the changes to Stamp Duty Land Tax (SDLT) and the cuts in VAT.
SDLT is charged on a 'slice'-based system. This means that the rate for each band applies only to the part of the consideration that falls in that band. Currently, there is an initial nil rate band. This means that no SDLT is paid on the first £125,000 of consideration for residential property.
The nil rate band has now been expanded so that there will be no SDLT on the first £500,000 of the consideration. This applies to all residential acquisitions. For the part of the consideration over the £500,000 threshold, the normal SDLT rates will continue to apply - starting at 5% and progressing to 12% (or 15% for companies and other 'non-natural persons').
Note that it will only apply to buyers in England and Northern Ireland. For now, the rates for buyers in Wales remain unchanged but the Scottish government has also now announced an increase in the threshold at which Land and Buildings Tax is paid from £145,000 to £250,000.
People buying second homes and buy-to-let properties will also benefit from the rate reduction, but will still have to pay the 3% additional rate.
This change is effective immediately and will apply until 31 March 2021.
For the next six months, there will be a reduction in VAT from 20% to 5% for the hospitality sector.
The reduced rate will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises.
The reduced rate will also apply to supplies of accommodation and admission to attractions such as zoos, theme parks and cinemas.
This measure will apply across the UK and full details will be published by HMRC in the next few days.
This lower rate applies from next Wednesday (15 July) to 12 January 2021.
This is general information and no action should be taken in reliance on it without first consulting a member of the Tax Team. If you have questions, please contact Ray Smith, David Blumenthal, Malcolm Frost or your regular contact in the Tax Team.