Significant changes to Stamp Duty Land Tax (SDLT) will impact property buyers and investors across the UK, with implementation set to begin in April 2025.

One significant alteration is the reduction of the nil-rate band, which will decrease from £250,000 to £125,000. As a result, the tax will now apply to properties priced lower than before, meaning buyers will face a larger SDLT bill as a proportion of their property transactions. This change is likely to create financial challenges, particularly for those on tighter budgets.

Additionally, the assistance available for first-time buyers is being scaled back, leading to higher costs for individuals entering the housing market for the first time. Starting on 1^st April, the SDLT threshold for first-time buyers will drop from £425,000 to £300,000. Moreover, properties valued over £500,000 (down from £625,000) will be taxed at the same rates as those purchased by individuals who have previously owned a property.

For example, if you purchase a house for £550,000 before 1^st April 2025, your stamp duty liability will be £15,000. After the deadline, this amount will increase dramatically to £17,500. If you are a first-time buyer, the pre-deadline SDLT amount would have been only £6,250, but it rises to the same £17,500 post-deadline because the first-time buyer relief can no longer be claimed below a purchase price of £625,000.

If timing is important, it’s important to note that the effective transaction date in these circumstances is completion, not exchange. Unless the contract is ‘substantially performed’ (usually payment of 90% plus of the price, or by taking possession of the property) before then, the completion date will usually decide the amounts of relief available. Therefore, it might be desirable for most to ensure completion before 1 April 2025 if this is practical.

These changes will also affect investors and buyers of second homes. The additional 5% SDLT will still apply as it does now. However, this extra 5% effectively does not apply if the property is replacing your primary residence and can normally be reclaimed once the original property is sold (conditions apply).

If you do not reside in the UK or are not present for at least 183 days within the 12 months leading up to your purchase (you will be classified as “not a UK resident” for SDLT purposes), you will incur a 2% surcharge on residential property purchases.

For developers contemplating purchasing properties for light or medium refurbishment, the increases are unlikely to have a significant impact. Purchases of these properties are generally made below market value and will still remain profitable. Furthermore, once the work is completed and the property is put back on the market, its value may even increase more than initially expected.

The changes to the nil-rate band, and aspects of the first-time buyer’s relief have overturned decisions originally announced in Liz Truss’s mini-budget in 2022. Although these adjustments are unwelcome, the property market has encountered similar circumstances before (granted, when interest rates were lower). However, property in general is still anticipated to perform well and remain a reliable investment.

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