The Autumn 2024 Budget introduced major changes to the current Stamp Duty Land Tax (‘SDLT’) regime that will become effective from 1st April 2025.
Understanding these changes is imperative for anyone buying residential property in England over the next 3 months, as you may find your tax liability will increase for transactions that do not complete before the changes are implemented. We have therefore put together this guide to help you navigate the new rules.
Current SDLT Regime:-
Under the current SDLT regime, the following SDLT rates apply:
Property or Lease Premium or Transfer Value | SDLT Rate |
| ||||
|---|---|---|---|---|---|---|
Up to £250,000.00 | 0% | |||||
The next £675,000.00 (proportion from £250,001.00 to £925,000.00) | 5% | |||||
The next £575,000.00 (proportion from £925,000.00 to £1.5 million) | 10% | |||||
The remaining amount (proportion over £1.5 million) | 12% |
In addition to the above rates, buyers of additional residential properties will attract a further 5% SDLT charge.
First-time buyers are currently entitled to a discounted rate, so long as the property purchased is under £625,000.00, meaning they pay no SDLT up to £425,000.00, but pay 5% on anything over this figure and up to £625,000.00. However, if the purchase price of £625,000.00 is exceeded then the relief does not apply at all and the usual rates apply.
SDLT Changes from 1 April 2025:-
From 1st April 2025, significant changes will be imposed to the current SDLT rates as follows:
Property or Lease Premium or Transfer Value | SDLT Rate |
|
|---|---|---|
Up to £125,000.00 | 0% | |
The next £125,000.00 (proportion from £125,001.00 to £250,000.00) | 2% | |
The next £675,000.00 (proportion from £250,001.00 to £925,000.00) | 5% | |
The next £575,000.00 (proportion from £925,000.00 to £1.5 million) | 10% | |
The remaining amount (proportion over £1.5 million) | 12% |
Impact on First-Time Buyers:-
Whilst first-time buyers will still be entitled to some relief, this is being considerably reduced - both in the amount of relief granted, and the value of the first home it can apply to.
In terms of relief amount, they will, from 1st April 2025, only pay 0% SDLT on the first £300,000.00 (reduced from £425,000.00) and 5% thereafter.
In addition, the total purchase price cap, currently set at £625,000.00, will be reduced to £500,000.00. Therefore, if a fist-time buyer wishes to purchase a property over £500,000.00, they will not be entitled to any SDLT reduction.
Impact on Higher Rates for Additional Properties:-
It is not only first-time buyers who are being hit with the SDLT changes.
Since 1st November 2024, the additional property surcharge was increased from 3% to 5% over the current SDLT rates. This means that those liable for the higher SDLT rates, such as investors or those buying second properties, will also pay an increased SDLT rate, some 5% over the already increased standard rates.
Practical examples:-
Standard Residential Buyer - If a standard buyer purchases a property in March 2025 for £350,000.00, they will pay £5,000.00 in SDLT charges. Contrast this to the new SDLT rates, a standard buyer purchasing a property in April 2025 will pay £7,500.00 in SDLT charges.
First-time Residential Buyer – If a first-time buyer purchases a property in March 2025 for £350,000.00, they will pay nothing in SDLT charges. Again, contrast this to the new SDLT rates, a first-time buyer purchasing a property in April 2025 will pay £2,500.00 in SDLT charges.
Higher Rate Buyer – If a buyer subject to the higher SDLT rates purchases a property in March 2025 for £350,000.00, they will pay £22,500.00 in SDLT charges. Contrasted again to the new SDLT rates, a buyer subject to the higher SDLT rates purchasing a property in April 2025 will pay £25,000.00 in SDLT charges.
All the above examples have resulted in a significant increase of £2,500.00 over the old rates. So, what can buyers do to prepare for the upcoming changes?
Preparing for SDLT changes:-
Budget Carefully: Buyers should calculate their SDLT liability in advance when planning their purchase of residential property. These increases in SDLT rates may mean you will need additional funds to purchase your desired property.
Stay Informed: Stay up to date with the latest updates or amendments to the SDLT changes by reviewing the Government guidance available online (Stamp Duty Land Tax: Overview - GOV.UK) as well as our future blogs and posts.
Seek Professional Advice: Liaise with Property and Tax specialists to understand how these changes will impact your purchase.
Plan Ahead: Take into consideration the timing of your transaction. If possible, a completion before the end of March 2025 may result in a significant tax saving.
If you are uncertain about how the above changes will affect you or you need any legal assistance with a property related matter, please do not hesitate to contact one of our specialists at Jamieson Alexander Legal and we would be delighted to assist.
