Stamp Duty Land Tax – Change is Coming!
What is Stamp Duty Land Tax?
Stamp Duty Land Tax (SDLT or Stamp Duty) is a tax payable to HM Revenue and Customs (HMRC) when buying a property or land in England and Northern Ireland. The amount of SDLT liability will depend on the purchase price and several other factors, including (but not limited to) whether a buyer is:
- purchasing a property as an individual or company
- a first-time buyer
- replacing a main residence
- purchasing additional property
- a non-UK resident
What is Changing?
In 2022, the Government made temporary changes to the tax rates to be applied resulting in tax savings for many buyers. Unfortunately this temporary change is due to end on 31 March 2025, meaning that any property transaction which completes from 1 April 2025 will be subject to the increased rates of Stamp Duty.
While this date might seem far away, it may take time to attract a buyer from the date the property is first listed. Thereafter once a buyer is found, an average residential property transaction can take anywhere between 8 and 16 weeks to complete, but can, in certain circumstances take much longer. Delaying factors such as legal issues that need to be resolved are generally only uncovered during the course of the property transaction which is worth bearing in mind.
The current Stamp Duty Land Tax rates on a standard residential purchase of a freehold property for an individual that is UK resident and whom is not liable to pay higher rates of tax (either owning no other property or replacing a main residence at the same time) is as follows:
0% up to £250,000
5% above £250,000 and up to £925,000
10% above £925,000 and up to £1,500,000
12% above £1,500,000
From 1 April 2025, the nil rate threshold will return to £125,000 and tax will be payable at a rate of 2% above £125,000 and up to £250,000.
Likewise the nil rate threshold for first time buyers will return back to £300,000 (currently set at £425,000). The maximum purchase price for which First-Time Buyers Relief can be claimed is currently £625,000 but this will also return to £500,000.
Hence for a purchase after 31 March 2025 the same UK resident buyer of a residential freehold property who is not liable to higher rates of tax would pay:
0% up to £125,000
2% above £125,000 and up to £250,000
5% above £250,000 and up to £925,000
10% above £925,000 and up to £1,500,000
12% above £1,500,000
What does this mean?
In summary, completing a purchase before the changes come into effect on 1 April 2025, a buyer can save up to £2,500 as shown in the examples below. The position is different for first time buyers, second homeowners, property investors, and companies.
The Stamp Duty changes are likely to have the most significant impact on first time buyers, for which see examples below.
It may therefore be worthwhile for residential buyers to bring forward their plans to purchase in order to take advantage of the current Stamp Duty rates before the increase takes effect.
Examples
According to Zoopla, in the last 12 months, the average detached property in Stockton-on-Tees was sold for £274,281 and for £215,628 in Middlesbrough. In London the average detached property was sold for £1,210,263. See examples below of the Stamp Duty liability of a standard rate tax payer for each of these averages at the current rates, and at the rates that will be applied following 31 March 2025:
| Average
Sold |
SDLT Calculation
(before 31 March 2025) |
SDLT Calculation
(from 31 March 2025) |
|
| Detached Stockton-on-Tees | £274,281 | 0% up to £250,000
5% above £250,000 Total = £1,214 |
0% up to £125,000
2% on the next £125,000 5% above £250,000 and up to £925,000 Total = £3,714 |
| Detached Middlesbrough | £215,628 | 0% up to £250,000
Total = £0 |
0% up to £125,000
2% on the next £90,628 5% on the remaining £104,767 Total = £1,812 |
| Detached London | £1,210,263 | 0% up to £250,000
5% above £250,000 and up to £925,000 10% above £925,000 and up to £1,500,000 Total = £62,276 |
0% up to £125,000
2% above £125,000 and up to £250,000 5% above £250,000 and up to £925,000 10% above £925,000 and up to £1,500,000 Total = £64,776 |
For first-time buyers the rates will be as follows:
| Property Value | SDLT Calculation (before 31 March 2025) | SDLT Calculation (after 31 March 2025) |
| £350,000 | 0% up to £425,000
Total = £0 |
0% up to £300,000
5% above £300,000 Total = £2,500 |
| £500,000 | 0% up to £425,000
5% above £425,000 Total = £3,750 |
0% up to £300,000
5% above £300,000 Total = £10,000 |
| £625,000 | 0% up to £425,000
5% above £425,000 and up to £625,000 Total = £10,000 |
First-Time Buyer Relief cannot be claimed
0% up to £125,000 2% above £125,000 and up to £250,000 5% above £250,000 and up to £925,000 Total = £21,250 |
Being aware of these coming changes to Stamp Duty Land Tax may assist our clients to plan ahead and aim to take advantage of the substantial tax savings currently on offer.
If you would like to discuss this article further, or if you any other questions please contact us.
Information correct as at November 2024
