The Autumn 2024 Budget introduced significant changes to Stamp Duty Land Tax (SDLT) in the UK, particularly affecting purchasers of additional residential properties and corporate buyers. This post will give you a simple break-down of the new stamp duty rates that were enacted in October, plus the changes that are coming down the line on 1st April next year. Let’s dive in!
Increased Surcharge on Additional Properties
Effective from 31 October 2024, the SDLT surcharge for individuals purchasing additional residential properties—such as second homes or buy-to-let investments—has risen from 3% to 5% above the standard residential rates.
Higher Rate for Corporate Purchasers
For companies and other non-natural persons acquiring residential properties valued over £500,000, the SDLT rate has increased from 15% to 17%, applicable to transactions with an effective date on or after 31 October 2024.
Reversion of SDLT Thresholds
From 1 April 2025, SDLT thresholds will revert to their pre-September 2022 levels. Notably, the 2% SDLT rate will apply to residential properties valued between £125,000 and £250,000, and the 5% rate will apply to properties valued between £250,001 and £925,000.
First-Time Buyer Relief Adjustments
Also from 1 April 2025, the threshold for First-Time Buyer Relief will decrease. First-time buyers will receive a 5% discount on homes priced between £250,000 and £425,000, down from the previous range of £250,000 to £625,000.
Transitional Provisions
For transactions where contracts were exchanged before 31 October 2024 but completed on or after that date, the previous surcharge rates may still apply, provided certain conditions are met.
Example: What happens if you buy property through a company
Let’s look at an example where a business buys a property for £750,000.
- Purchase Price: £750,000
- Buyer: A company (non-natural person)
Calculation:
- Base SDLT Calculation:
- For the first £250,000, the standard rate is 0%.
- For the next £250,000 (from £250,001 to £500,000), the standard rate is 5%.
- For the remaining £250,000 (from £500,001 to £750,000), the standard rate is 10%.
So, the base SDLT is: £37,500
- Surcharge for Non-Natural Persons:
- Since the purchase price exceeds £500,000, the 17% surcharge applies to the entire purchase price of £750,000.
So, the surcharge is: £127,500
- Total SDLT Payable:
- Total SDLT = Base SDLT + Surcharge
- Total SDLT = £37,500 + £127,500 = £165,000
The total Stamp Duty Land Tax of £165,000 equates to 22% of the total purchase price of the £750,000 property. A pretty chunky stamp duty bill by any standard.
How will these rate changes impact the UK property market?
The recent and upcoming changes to Stamp Duty Land Tax (SDLT) in the UK are poised to influence various segments of the property market. Let’s now take a look at the key changes one by one and explore how they will affect the market.
Increased SDLT Surcharge on Additional Properties (Effective 31 October 2024)
The surcharge for purchasing additional residential properties, such as second homes and buy-to-let investments, has risen from 3% to 5%.
Potential Impacts:
- Reduced Investment in Rental Properties: Higher acquisition costs may deter investors, potentially leading to a decrease in the supply of rental properties. This could result in higher rents due to reduced availability.
- Increased Opportunities for First-Time Buyers: With fewer investors competing, first-time buyers might find it easier to enter the market, potentially stabilising or reducing property prices in certain areas.
Reversion of SDLT Thresholds (Effective 1 April 2025)
SDLT thresholds will revert to pre-September 2022 levels. Notably, the 0% rate will apply only to properties up to £125,000, down from the current £250,000 threshold.
Potential Impacts:
- Increased Transaction Costs: Buyers purchasing properties above £125,000 will face higher SDLT liabilities, potentially reducing affordability and dampening demand, especially in regions with higher property values.
- Market Activity Surge Before April 2025: Anticipation of higher SDLT rates may lead to a rush of transactions before the changes take effect, followed by a potential slowdown post-implementation.
Adjustment to First-Time Buyer Relief (Effective 1 April 2025)
The threshold for First-Time Buyer Relief will decrease from £425,000 to £300,000. Additionally, the maximum property value eligible for any relief will drop from £625,000 to £500,000.
Potential Impacts:
- Reduced Affordability for First-Time Buyers: First-time buyers purchasing properties between £300,000 and £425,000 will incur SDLT liabilities where previously exempt, potentially making it more challenging to get on the property ladder.
- Shift in Demand: There may be increased competition for properties priced below £300,000, potentially driving up prices in this segment.
If you’re a buy-to-let investor, second-home owner, or have a property in the higher-value range, recent changes to Stamp Duty Land Tax could be impacting your investment plans.
The rising surcharge rates on additional properties and increased costs for corporate buyers mean it’s becoming more challenging to see a strong return on investment. Rather than dealing with the potentially lower yields, or waiting for buyers from an ever diminishing pool to make an offer, consider selling quickly to Property Rescue offers a practical, profitable solution.
Property Rescue will gladly buy your property directly from you so there’s no estate agents, no tire kickers. No crossing your fingers and hoping for an offer. We’re ready to offer a fair, straightforward sale on your timeline, allowing you to move forward without the stress and uncertainty that these tax changes might bring. Get in touch today for a no obligation chat.