SDLT: Where are we now?

SPONSORED: Stamp Duty Land Tax (SDLT) is a tax charged by HMRC on land and property purchases in England and Northern Ireland. SDLT is levied as a percentage of the property and land purchase price. However, the SDLT rates vary depending on many factors, for example the property’s purpose and the purchaser’s ownership status. The rates and exemption thresholds are different for first-time buyers purchasing residential property.

SDLT is indeed a tiered tax, with the result that different parts of the property’s purchase price are taxed at progressively higher SDLT rates. Changes were made to some of the rates in the Autumn 2024 Budget.

The higher rate of SDLT relating to purchases of second homes and investment properties has been increased from 3% to 5% from 31 October 2024.

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

Property CostSDLT Rate
Up to £250,000Nil
£250,001 to £925,0005%
£925,001 to £1.5m10%
Over £1.5m12%

Purchasing a second home (or investment property) rates (5% surcharge), from 31 October 2024

Property CostSDLT Rate
Up to £250,0005%
£250,001 to £925,00010%
£925,001 to £1.5m15%
Over £1.5m17%

SDLT is payable to HMRC within 14 days from the date of the completion of purchase of the property.

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

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’ relief can be claimed was also increased to £625,000.

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

Property CostSDLT Rate
Up to £425,000Nil
£425,001 to £625,0005%

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 31 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 1 April 2025, the property limit for the SDLT reduction for first-time buyers will revert 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 acquiring a new home, from 1 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 valueRate (on portion of value above threshold)Rate (on portion of value above threshold) if purchase is of an additional residential property
£0 to £125,0000%5%
£125,001 to £250,0002%7%
£250,001 to £925,0005%10%
£925,001 to £1.5m10%15%
Over £1.5m12%17%

Example

In November 2024, 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 @ 0%             Nil 
175,000 @ 5%8,750 
 8,750

They need to move sharply and complete by 31 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 @ 252,500
350,000 @ 5%17,500
600,00020,000

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

The meaning of residential property

Residential property is defined within FA 2003, s. 116 as:

‘(a)a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use; and

(b)land that is or forms part of the garden or grounds of a building within paragraph (a) (including any building or structure on such land); or

(c)an interest in or right over land that subsists for the benefit of a building within paragraph (a) or of land within paragraph (b);

and “non-residential property” means any property that is not residential property.’

Replacing your main residence

Individuals will not pay the extra 5% SDLT surcharge if the property they are purchasing has replaced their main residence which has already been sold. If the individual has not sold its main residence on the date that it completes the purchase of the new home, then it will be charged the higher 5% SDLT surcharge, because it owns two properties.

The purchaser will be able to claim a repayment of the 5% surcharge rate if they sell their previous home within three years of purchasing their new main residence.

Spouses and indeed civil partners are treated as one regarding this particular part of the SDLT legislation. Even if one of the couple does not own another property, they will be treated as doing so, provided their spouse or civil partner does.

SDLT rates for non-UK residents

An individual will be considered non-UK resident provided they are not present in the UK for at least 183 days in the twelve months prior to the acquisition of the property in question. An individual is a UK resident if it is present in the UK at midnight. The non-resident individual will normally pay a 2% SDLT surcharge if buying a residential property in England or Northern Ireland.

Downsizing in retirement

Many older taxpayers feel that there should be some SDLT concession or reduction in the rates when a retired individual downsizes. For example, Tom and Anne are both aged 68. Their children have left the family home, and they want to sell it and move into a smaller home for their retirement. The capital profit they will have made on the sale of the previous family home will have been considerably diminished by the SDLT due on the purchase of their replacement property.

The SDLT changes made by the new Chancellor, in her Autumn 2024 Budget, highlight the Government’s intention to cool certain parts of the property market by increasing the SDLT payable on second home and investment residential property purchases. This will hit residential landlord purchasers badly.

More than ever, SDLT costs will have to be considered and factored into proposed future residential property acquisitions.


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