Understanding Stamp Duty and the Upcoming Changes in 2025
Stamp Duty Land Tax (SDLT), commonly referred to as Stamp Duty, is a tax applied when you buy property or land in England and Northern Ireland. Whether you are purchasing your first home or investing in property, understanding how Stamp Duty works and the upcoming changes to the tax is crucial for anyone navigating the UK property market.
What is Stamp Duty?
Stamp Duty is due when you buy property or land worth over a certain amount. The amount of tax you pay depends on several factors, including the price of the property, your residency status, and your specific situation. For example, are you a first-time buyer, replacing your main residence, or purchasing a second property?
Currently, there are different rates depending on the price of the property, with higher rates applied to more expensive homes. First-time buyers may benefit from discounts or lower rates, while second-home buyers face higher rates.
Temporary Increase In Stamp Duty Tresholds
In September 2022, the UK Government temporarily raised the Stamp Duty thresholds, offering temporary relief to buyers, to stimulate the property market following the pandemic. These temporary thresholds are set to end in March 2025, after which they will return to the previous, lower thresholds.
For those looking to purchase property before March 2025, there is a significant potential for savings. So, if you are thinking of moving it is important to note that although it may still seem like months away, the average length of time it takes for a property transaction to go from offer accepted to completion is 16 weeks, so you will need to move quickly to ensure you reach completion before the deadline.
How Will the Changes Affect Buyers?
Main Residential Properties
When the new thresholds come into effect in March 2025, the tax bands will revert to pre-September 2022 levels. This could result in a higher Stamp Duty bill for many buyers. For example, a typical buyer could save around £2,500 by completing their purchase before the changes take effect.
For first-time buyers, the current relief allows them to purchase a home worth up to £625,000 whilst still receiving relief on Stamp Duty. However, with the proposed changes in March 2025, this will be reduced, and the maximum price eligible for relief will drop to £500,000. This change is expected to impact many first-time buyers, particularly in areas where property prices are higher, such as in London and the South of England.
Above is how the thresholds will be changing.
Second Properties
During the budget, the government announced they have increased the Stamp Duty rate for second homes and buy-to-let properties. As of 31st October, buyers of second homes are now subject to an extra 5% surcharge on top of the existing Stamp Duty rates. This means those purchasing second properties will face significantly higher costs, which may influence potential investors or buyers of holiday homes.
Above is how the thresholds have changed for those buying a second property.
If you are considering buying property in the near future, now is the time to act if you want to avoid paying higher Stamp Duty costs after March 2025. These changes will affect everyone but particularly first-time buyers, so it’s essential to understand how these changes could impact your purchase.
If you have any questions about how the upcoming changes will affect you or need advice on navigating Stamp Duty, our team of experts are here to help. Feel free to get in touch for more information.
