Stamp Duty Land Tax Changes for Property in 2025: What You Need to Know

Posted by Greenslade Taylor Hunt on 24th January 2025 -

The property market has experienced various changes to the Stamp Duty Land Tax (SDLT) in recent years, including the announcement of temporary reductions in 2022 aimed at supporting the housing market and making home ownership more affordable. 

As the property market continues to evolve, it has been confirmed that these changes will end on 31st March 2025, meaning SDLT rates will revert to their previous levels starting on 1st April 2025. Subsequently, many clients are reaching out, hoping to complete transactions before the new rules come into play. Here’s a closer look at what these changes entail.

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a key factor in property purchases in the UK, this government tax is designed to collect revenue from property transactions upon completion. 

Understanding the Current Stamp Duty System

Below are the key changes for both main residences and first-time buyers:

Main Residences
•    The nil-rate threshold (0% SDLT) will decrease from £250,000 to £125,000. 
•    Purchases between £125,001 and £250,000 will now incur a 2% SDLT charge. 
•    SDLT rates for higher purchase price brackets remain unchanged.
 

Property Value	Current Rate: until 31st March 2025	New Rate: from 1st April 2025
Up to £125,000	0%	0%
The next portion from £125,001 to £250,000	0%	2%
The next portion from £250,001 to £925,000	5%	5%
The next portion from £925,001 to £1.5 million	10%	10%
The next portion above £1.5 million	12%	12%

Therefore, the SDLT for a main residence purchase of a £350,000 property with completion prior to 1st April would be £5,000. If completion were to fall after 1st April, the SDLT would be £7,500, meaning there would be an additional cost of £2,500. 

First-Time Buyers
•    The nil-rate threshold will reduce from £425,000 to £300,000. 
•    The maximum property value eligible for first time buyer relief will decrease from £625,000 to £500,000.
 

Current Rate:  until 31st March 2025	New Rate:  from 1st April 2025
up to £425,000 - 0%	Up to £300,000 - 0%
The next £200,000 portion from £425,001 to £625,000 - 5%	The next £200,000 portion from £300,001 to £500,000 - 5%
Over £625,000 standard rates apply	Over £500,000 standard rates apply

Therefore, the SDLT for first time buyers purchasing a £350,000 property with completion prior to 1st April would be £0. If completion were to fall after 1st April, the SDLT would be £2,500, meaning there would be an additional cost of £2,500. 

Who counts as a First-Time Buyer?

Understanding the criteria for what is classified as a first-time buyer is crucial for those seeking relief from SDLT. A first-time buyer is defined as:
•    Someone who is purchasing their only or main residence, and 
•    has never owned a freehold or leasehold interest in a residential property, whether in the UK or abroad. 

It is essential to note that inheriting a property, even partially, disqualifies individuals from this status

Buying with others – meeting the criteria

If you are considering buying a property with another person and wish to take advantage of Stamp Duty relief, both parties must meet the above criteria to be classified as first-time buyers. This requirement ensures that the benefits of first-time buyer relief are directed only to those who have not previously owned property.

Additional Residences
Usually, an additional 5% SDLT applies to second homes and buy-to-let properties.

If you are selling your main residence and replacing it with another property that will form your main residence you will not pay the extra 5% SDLT. However, if you have not sold your main residence on the day you complete your new purchase, the higher rates will apply as you will effectively own two properties simultaneously. You can apply for a refund on the additional rate if you sell your previous main home within 36 months. 

Conclusion
The upcoming changes to Stamp Duty Land Tax from 1st April 2025 will mean that buyers must adapt to the new financial implications. As these changes draw closer, prospective homeowners need to stay informed and proactive in their purchasing strategies.

While it may be possible to expedite mortgage arrangements, prospective buyers should be cautious. Completion timelines could still be affected by factors such as the property chain and the demands on the solicitors involved. Thus, it is essential to initiate the purchase process as early as possible and ensure clear communications between all parties to avoid any last-minute complications.