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Are you planning to purchase a new property within the next few months? Vursha Joye, an Associate Solicitor specialising in Residential Property answers your questions on the significant changes to Stamp Duty Land Tax (SDLT) will come into effect on 1st April 2025.

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT) is a tax payable to HM Revenue and Customs when purchasing land or property. The amount of tax you pay depends on when you buy the property or land, how much you are buying it for, and whether you are eligible for a relief or an exemption.

For example, under the current rules if you are purchasing a property as your main residence for £425,000 on or before 31st March 2025, and you are not a first-time buyer (FTB), you will pay £8,750.

What are the changes that is happening and why?

The Government announced in their October 2024 Budget that the current (temporary) rates introduced in 2022 will come to an end. All transactions which complete after 31st of March 2025 will be subject to the new increased rates of SDLT.

What are the new rules for SDLT?

• There will be a reduction in the Nil rate band. Currently, no SDLT is payable on the first £250,000 (Nil rate band) of the purchase price. On 1st April 2025, the nil-rate threshold will change to £125,000 and SDLT payable from £125,001 to £250,000 will be 2%. Based on the above example, this would be an extra £2,500 SDLT payable.

• First time buyers’ exemption threshold will drop. Under the current rule, FTB are exempt from paying SDLT on properties priced up to £425,000 and the relief is available on properties priced up to £625,000. From 1st April 2025, the nil rate threshold will drop to £300,000 from £425,000 and the cap on qualifying properties will be £500,000 as opposed to £625,000.

Using the same example as above, if you purchase a property for £425,000 on or after 1st April 2025, homeowners will now pay £11,250 (which is an additional £2,500) as the nil rate has been halved.

First time buyers purchasing a property priced at £425,000 will now pay £6,250 compared to £Nil on or before 31st of March 2025.

How will this affect First-time buyers and how can they plan ahead?

First time buyers are amongst those affected the most as properties above £500,000 will no longer qualify for a relief. Properties priced between £300,001 to £425,000 will no longer be exempt from SDLT and if you are purchasing a property for £625,000, you will now have to pay an additional £11,250 in SDLT!

If you have not done so already, please let your conveyancer know that you are planning to complete your purchase before 1 April 2025 to benefit from the current thresholds. A freehold purchase takes on average 4 to 6 weeks to complete and a leasehold purchase between 10-12 weeks or longer depending on the complexities, so you should inform your estate agent, broker, and mortgage provider as well of your intentions so that you start the conveyancing process asap and you do not miss the deadline.

Is there anything else that can affect the SDLT due on completion?

• Higher rates for additional property

Usually, you will pay 5% in addition to the SDLT rates if you are buying a new property and on completion, you will own more than one property in the UK or anywhere in the world.

• Non-UK residents – SDLT residence tests

An additional 2% surcharge is applicable if you are buying a residential property, and you are not a UK resident. If you have not been present in the UK for at least 183 days during the 12 months immediately before your purchase completes, then you may be liable.

Reliefs and refunds may apply. Seek professional advice from your tax advisor to avoid any tax complications and penalties. You can also use the updated SDLT calculator on the Government website to calculate your rates. On the Government website, you can also find guidance on the reliefs available.