Partner and Head of Conveyancing, Nigel Matthews discusses the changes to Stamp Duty Land Tax (SDLT) following Rachel Reeves’s Budget last week.
Following the delivery Rachel Reeves’s Budget, I wanted to highlight the changes to SDLT that will have an immediate impact on our clients. You will have noted that the 3% surcharge on additional properties (second homes or investment properties) has now been increased from 3% to 5% with immediate effect.
Are there any exceptions to this?
There is an exception, as there often is. If you exchanged contracts on or before 30 October 2024, the old rate of 3% will continue to apply.
The transitional provisions do not contain an “end date”, so, as it stands, so long as contracts were exchanged on or before 30 October 2024 and there is no variation / change of buyer, the rates of SDLT are applied as the rules were before the Budget changes. So, the 3% surcharge applies rather than 5%, even if there is a long delay before completion.
What if we haven’t exchanged yet? Will I have to pay the higher rate of Stamp Duty Land Tax?
Those currently involved in transactions who have not already exchanged contracts will have to re-evaluate their finances if buying at the higher rate. Purchasers will have to assess the impact of the additional duty on them and decide whether they still wish to proceed. In some cases, this may lead to the seller being asked to consider revised offers at reduced figures so as to share the burden of the additional SDLT their buyer had not anticipated at the outset. The government have updated their Stamp Duty Land Tax Calculator here.
How might this affect first-time buyers?
These higher rates apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property.
From a first-time buyer’s perspective the increase will provide those looking to move home or purchase their first property with a comparative advantage over those purchasing additional property.
The Government forecasts suggest that this is expected to result in 130,000 additional first-time buyers transactions over the next five years and also other people buying their primary residence. It is of course yet to be seen how realistic those forecasts are.
What about first-time buyers’ Stamp Duty Land Tax Relief?
The government also confirmed that the “sun-setting” of the temporary residential rates of stamp duty land tax – introduced by the previous government in 2022 – will go ahead as planned on 31 March 2025.
Therefore with an effective date on or after 1 April 2025:-
- The residential nil rate band will revert to £125,000.
- The First-time Buyers’ Relief nil rate band will revert to £300,000.
- The maximum transaction value for First-time Buyers’ Relief will revert to £500,000.
However, this relief works slightly differently to the SDLT provision for additional properties. If it completes after 1 April 2025, it will be caught by the change in thresholds, as a prior exchange of contracts does not help here. This could be particularly prevalent in respect of New Build purchases which are still under construction with completion to take place on notice.
How can we help?
If you have any questions about how the Stamp Duty Land Tax change will affect you, please call our conveyancing team, who will be more than happy to discuss the new provision with you.
