Changes to Stamp Duty for Residential Property

From 1st April 2025, the laws surrounding Stamp Duty Land Tax (more commonly referred to as just ‘stamp duty’) are changing in England. This will impact all purchases made before April 1st 2025, with first-time buyers being particularly impacted.

Stamp duty is a government mandated tax paid by the buyer of a property or land upon completion for both freehold and leasehold properties. There are many factors that influence how much stamp duty will need to be paid including:

·        The date of completion

·        The purchase price or lease premium

·        Whether the purchaser is eligible for relief or exemption (eg first-time buyer)

·        Whether the purchaser owns additional property

·        Whether the purchaser is a UK resident

The stamp duty rates prior to April 1st 2025

Property or lease premium or transfer value	SDLT rate
Up to £250,000	Zero
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount (the portion above £1.5 million)	12%

Stamp duty rates from April 1st 2025 onwards

Property or lease premium or transfer value	SDLT rate
Up to £125,000	Zero
The next £125,000 (the portion from £125,001 to £250,000)	2%
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount (the portion above £1.5 million)	12%

How will this affect the amount of stamp duty you pay?

As stamp duty is calculated using the thresholds in the above tables, the changes mean that you will very likely have to pay more for any purchase made after April 1st 2025.

For example, if you purchased a property prior to April 1st 2025 for £1 million, it would be calculated as below:

·        The first £250,000 is calculated at a nil-rate- £250,000*0%= £0

·        The next £675,000 is calculated at a 5% rate- £675,000*5%= £33,750

·        The remaining £75,000 is calculated at a 10% rate- £75,000*10%= £7,500

·        The stamp duty payable is £33,750+£7,500= £41,250

As you can see in the above tables, the government has changed and added to the thresholds and this will have an effect on the amount stamp duty you will be liable to pay after April 1st 2025.

A purchase of a property after April 1st 2025 for £1 million will be calculated accordingly:

·        The first £125,000 is calculated at a nil-rate- £125,000*0%=£0

·        The next £125,000 is calculated at a 2% rate- £125,000*2%= £2,500

·        The next £675,000 is calculated at a 5% rate- £675,000*5%= £33,750

·        The remaining £75,000 is calculated at a 10% rate- £75,000*10%= £7,500

·        The stamp duty payable will be £2,500+£33,750+£7,500= £43,750

Changes for first time buyers

First time buyers are often able to claim relief on the amount of stamp duty payable. First time buyer relief is available for individuals or multiple buyers. However, if there is more than one purchaser

Rules for first time buyers prior to April  1st 2025:

·        first time buyers pay no stamp duty up to £425,000

·        5% on the portion from £425,001 to £625,000

If the purchase price is over £625,000 then first-time buyers are unable to claim this relief.

The incoming changes to SDLT mean that after April 1st 2025:

·        first time buyers pay no stamp duty up to £300,000

·        5% on the portion from £300,001 to £500,000.

If the purchase price is over £500,000 then first-time buyers will be unable to claim this relief.

This means that if a property is purchased prior to April 1st 2025 for £400,000:

·        0% is payable on the whole £400,000

·        The stamp duty payable is £0

If a property is purchased for £500,000 then:

·        0% is payable on the first £425,000 = £0

·        5% is payable on the remaining £75,000 = £3,750

·        The stamp duty payable is £3,750

If a property is purchased after April 1st 2025 for £400,000:

·        0% is payable on the first £300,000= £0

·        5% is payable on the remaining £100,000= £5,000

·        The stamp duty payable will be £5,000

If a property is purchased for £500,000:

·        0% is payable on the first £300,000= £0

·        5% is payable on the remaining £200,000= £10,000

·        The stamp duty payable will be £10,000

Therefore unless a first-time buyer purchases a property for less than £300,000 then they will be paying more stamp duty after April 1st 2025 than they would before.

The biggest change would occur if a first time buyer were to purchase a property between £500,000 and £625,000 as the incoming changes mean that they would not be able to claim this relief at all.

Rates for additional properties

If the residential property being purchased means that any of the purchasers will own more than 1 property at the time of completion, then an additional 5% will be added to each of the thresholds used to calculate stamp duty. This applies to purchases both before and after April 1st 2025.

You will not be charged an extra 5% if the property you are purchasing is to be used as your main residence and you have already sold your previous main residence at the time of completion.

However, if you have not yet sold your previous main residence on completion then you will have to pay the extra 5% charge. If you then sell your previous main residence in the next 36 months, you will be able to claim a refund for the additional stamp duty charge paid.

Using the above example, if you are purchasing a property after April 1st 2025 for £1 million and it is an additional property:

·        The first £125,000 is calculated at a 5% rate- £125,000*5%=£6,250

·        The next £125,000 is calculated at a 7% rate- £125,000*7%= £8,750

·        The next £675,000 is calculated at a 10% rate- £675,000*10%= £67,500

·        The remaining £75,000 is calculated at a 15% rate- £75,000*15%= £11,250

·        The stamp duty payable will be £6,250+£8,750+£67,500+£11,250= £93,750

Rates for non-UK residents

Non-UK residents are liable to pay a 2% surcharge on their stamp duty tax. This 2% surcharge can be added to the 5% charge for additional properties, and can also apply to rates for buyers claiming relief as first-time buyers.

For the purposes of stamp duty, being a UK resident means that you must have spent at least 6 months (183 days) of the previous 12 months before the completion date in the UK. This is regardless of whether you are UK citizen or not. If there is more than one purchaser, all of the purchasers will need to qualify as UK residents in order to escape paying the surcharge. There is an exception to this rule in respect of a joint purchase made by a married couple, or by civil partners, in that the 2% surcharge does not apply if one of the parties to the transaction is UK resident for stamp duty land tax purposes.

A refund of the 2% surcharge is available if you spend at least 183 days during any continuous 365-day period that falls within the 2 year period starting 364 days before completion and ending 365 days after completion.

Continuing the example used if a non-UK resident bought a property after April 1st 2025 for £1 million:

·        The first £125,000 is calculated at a 2% rate- £125,000*2%=£2,500

·        The next £125,000 is calculated at a 4% rate- £125,000*4%= £5,000

·        The next £675,000 is calculated at a 7% rate- £675,000*7%= £47,250

·        The remaining £75,000 is calculated at a 12% rate- £75,000*12%= £9,000

·        The stamp duty payable will be £2,500+£5,000+£47,250+£9,000= £63,750

If a non-UK resident bought an additional property after April 1st 2025 for £1 million:

·        The first £125,000 is calculated at a 7% rate- £125,000*7%=£8,750

·        The next £125,000 is calculated at a 9% rate- £125,000*9%= £11,250

·        The next £675,000 is calculated at a 12% rate- £675,000*12%= £81,000

·        The remaining £75,000 is calculated at a 17% rate- £75,000*17%= £12,750

·        The stamp duty payable will be £8,750+£11,250+£81,000+£12,750= £113,750

This article only applies to the purchasing of residential properties in England and does not apply to:

·        corporate bodies

·        people buying 6 or more residential properties in one transaction

·        shared ownership properties

·        multiple purchases or transfers between the same buyer and seller (‘linked purchases’)

·        companies and trusts buying residential property

·        people buying a property or land in Scotland, Wales or Northern Ireland

·        Commercial Properties

If you have any queries or would like to know more about the process of purchasing a property, please contact us to speak to one of our experts. We will also happily give you a no obligation quotation.