Stamp Duty Land Tax (SDLT) is the full name of the tax on property and land. This tax will change starting from 1st April 2025, as announced during the Autumn Budget. In fact, some of the changes have already taken place. So, what is Stamp Duty? How is it changing?
What is Stamp Duty (SDLT)
SDLT is a tax due on land or property over a certain price in England and Northern Ireland. Wales and Scotland have their own versions.
The amount of tax you pay when buying the property will depend on certain factors like:
- The value of the property
- Whether it is commercial or residential
- Whether it is your second or additional property
The rates of SDLT are higher for residential properties than non-residential ones. You can find the full guidance and the different rates here.
When you purchase a property, you will have 14 days to make a payment. Most house buyers make the payment via their solicitors as this is the easiest option, but you can choose to pay it online.
What is changing with SDLT
Currently, homebuyers purchasing properties valued at less than £250,000 are exempt from paying stamp duty. This threshold was raised from £125,000 as part of the mini-budget introduced by Liz Truss in September 2022.
Additionally, for first-time buyers, the stamp duty threshold has been increased to £425,000, up from the previous £300,000, also as a result of the same mini-budget.
However, these elevated thresholds are set to expire at the end of March 2025, as announced in the last Budget by the current Chancellor.
To summarise here’s the current stamp duty rate structure:
- £0 to £250,000 (or £425,000 for first-time buyers) = 0%
- £250,001 to £925,000 = 5%
- £925,001 to £1.5m = 10%
- Over £1.5m = 12%
From April 2025 the rates will revert to:
- £0-£125,000 (£300,000 for first-time buyers) = 0%
- £125,001 – £250,000 = 2%
- £250,001 to £925,000 = 5%
- £925,001-£1.5m = 10%
- Over £1.5m = 12%
Let’s look at an example
Let’s say you are buying a flat for £300,000 in February 2025 as your main home (but not your first home), the SDLT will be:
- 0% to £250,000
- 5% on £50,000 to £300,000 which is £2,500
Let’s say there was a delay, and you purchased the same property on 5 April 2025; the numbers will look very different.
- 0% to £125,000
- 2% on £125,000 to £250,000 which is £2,500
- 5% on £50,000 to £300,000 which is also £2,500
- An increase of 100% in SDLT to £5,000
What if you are a landlord, are there any changes to SDLT?
If you are a landlord, you are likely to own your own home. Therefore, you will be liable for an additional surcharge when buying your second or additional properties.
If you own a residential property worth £40,000 or more and you decide to buy another property (or a share in one), you’ll need to pay an additional 5%. This rate has increased from 3% since last October, following the recent Budget changes.
Let us refer to our above example and say that the flat is for investment. You quite fancy becoming a landlord to secure a future stream of income. That being the case what will the SDLT numbers look like?
The rates applicable to a landlord from next April will be:
- 5% to £125,000
- 7% on £125,000 to £250,000
- 10% on £50,000 to £300,000
- A total of £20,000. This is an extra £15,000 in SDLT because it is a second property.
Other complications when buying a property
The rules can get even more complicated say:
- If you are getting married and buying a new home with your partner and one of you will still own their own property.
- Buying a property with someone else (like a parent) who has their own property
- If any of you own a property abroad
- If you are buying a property as a trustee
If any of the situations mentioned above apply to you, we recommend consulting your property lawyer or accountant for clarity. There is a strong possibility that you will need to pay the surcharge, similar to landlords, or at the very least, you should plan carefully.
There are also special rates if you are buying commercial property or buying a leasehold.
HMRC has a handy calculator if you want to find out what your liability will be.
Tax can be a bit more complicated than just crunching some numbers. There’s a whole lot to consider beyond just the figures!
At Myers Clark, we are experts in working with landlords. Get in touch if you have any questions about the taxing of investment properties.
What should you do if you are mid-transaction or are planning to buy
We’re understanding that the property market may experience a modest spike due to the upcoming rate increases scheduled for next April. If you’re currently in the midst of a transaction, we strongly encourage you to do everything possible to complete it by the end of March.
If you’ve been considering purchasing an investment property for the next tax year, it might be wise to think about moving that decision up. However, we want you to know that you’re not alone in this process please reach out to us for a conversation. We’re here to support you and help you navigate the best path forward.
If you are working with us already, please speak to your normal contact. If you are not yet working with us here’s how we work