Stamp Duty Land Tax (SDLT): Where are we now?

The higher rates of SDLT relating to the purchase of second homes and rental properties were increased from 3% to 5% from 31st October 2024.

Table of Contents

Normal mainstream SDLT rates re purchasing residential property from 31st October 2024

Property Cost

SDLT Rate

Up to £250,000

Zero

£250,001 to £925,000

5%

£925,001 to £1.5million

10%

Over £1.5million

12%

 

Purchasing a second home (or rental domestic property) Rates (5% surcharge), from 31st October 2024

Property Cost

SDLT Rate

Up to £250,000

5%

£250,001 to £925,000

10%

£925,001 to £1.5million

15%

Over £1.5million

17%

These increased rates of SDLT, particularly for landlords, are now very expensive! The increased SDLT surcharge will act as a further deterrent for landlords who are considering acquiring further ‘buy to let’ properties.

 

Non-UK residents

Non-UK residents that purchase a residential property in England and Northern Ireland are liable to a 2% SDLT surcharge (the NR surcharge).

 

The NR surcharge will apply to the entire purchase price. It adds an additional 2% to each of the existing SDLT residential rates.

 

Purchases by non-resident individuals

An individual will be non-UK resident for the purposes of SDLT if they spend fewer than 183 days in the UK in any continuous period of 365 days, beginning 364 days before and ending 365 days after the transaction occurs.

 

Limited Companies

Limited companies will always pay a 5% surcharge, on top of the standard SDLT rate when they purchase residential property in England and Northern Ireland.

First-time buyers

The threshold for first-time buyers was temporarily increased in September 2022 to £425,000 and the maximum value of a property on which first-time buyers’ SDLT relief can be claimed was also increased to £625,000.

 

The SDLT position for first time buyers is currently as follows:

 

Property Cost

SDLT Rate

Up to £425,000

Nil

£425,001 to £625,000

5%

These SDLT reductions will remain in place until 31 March 2025. Accordingly, they are temporary.

 

Certain first time buyers will have to act very promptly in order to complete their purchases before 31st March 2025. If they fail to do so, in some cases huge extra SDLT will be payable!

 

The end of the Stamp Duty holiday

From 1st April 2025, the nil rate SDLT threshold will be reduced from £250,000 to £125,000, marking the end of the SDLT holiday, which was introduced in the September 2022 mini Budget.

 

The first time buyer threshold will also be reduced from £425,000 to £300,000.

 

From 1 April 2025, the property limit for the SDLT reduction for first-time buyers will resort to £500,000 and only the first £300,000 of the value of the property will be exempt from SDLT, with 5% payable on any remainder up to the reduced £500,000 figure.

 

For other buyers, i.e those property owners moving to a new home, from April 2025 the £250,000 exemption will be scrapped and only the first £125,000 of a property purchase will be stamp duty free, with a 2% rate charged from £125,000 to £250,000.

Stamp Duty Land Tax — residential property from 1 April 2025

Property value

Rate (on portion of value above threshold)

Rate (on portion of value above threshold) if purchase is of an additional residential property

£0 to £125,000

0%

5%

£125,001 to £250,000

2%

7%

£250,001 to £925,000

5%

10%

£925,001 to £1.5 million

10%

15%

Over £1.5 million

12%

17%

 

Example of SDLT on a residential property transaction

 

In January 2025, Tom and Lynne (both first time buyers) are considering buying a flat for £600,000.

 

The SDLT that they will pay relating to the purchase will be:

 

£

£

425,000 at 0%

Nil

175,000 at 5%

8,750

 

8,750

 

They need to move sharply and complete by 31st March 2025.

 

If they fail to do so and purchase the property in April 2025, the SDLT payable will be at the normal SDLT rates, because they have bought a property for more than £500,000.

 

SDLT payable:

£

£

125,000 @ 0%

Nil

125,000 at 2%

2,500

350,000 at 5%

17,500

600,000

20,000

 

They will have an extra £11,250 SDLT to pay.

 

Conclusion

First time buyers in a similar position to Tom and Lynne above, will have to move very quickly and complete by 31st March 2025. If they fail to do so, the additional SDLT payable could be considerable.

 

Landlords purchasing domestic rental properties are now also badly hit by the increased SDLT rates.

 

The impact of SDLT should never be overlooked when considering the purchase of a residential property.

 

Contact Tim Palmer CTA ATT, Tax Consultant, for more information on SDLT.

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