20th January 2025 | Shen Hussein | residential real estate, conveyancing, Stamp Duty Land Tax

As the UK government rolls out changes to the Stamp Duty Land Tax (SDLT) regime in April 2025, it’s essential for buyers and property investors to understand the impact these updates may have on their plans. Whether you’re purchasing a family home, adding to your property portfolio, or stepping onto the property ladder for the first time, these changes may affect the cost of your transaction.

What’s Changing?

  1. Higher SDLT for Second Homes and Buy-to-Let Properties

From 31st October 2024, the SDLT surcharge on second homes and buy-to-let properties increased by 2%. Buyers of additional properties currently pay a 5% surcharge on top of the standard SDLT rates, making it more expensive to invest in second homes or rental properties.

2.First-Time Buyer SDLT Relief

The SDLT relief scheme for first-time buyers, which provided a reduction or complete exemption for purchases below certain thresholds, will change. Currently, first-time buyers purchasing homes up to £625,000 (or receiving relief on the first £425,000) benefit from substantial savings.

From 1st April 2025, first-time buyers will pay no SDLT on the first £300,000 of a property priced up to £500,000. Beyond £300,000, SDLT will apply at standard rates up to the purchase price cap of £500,000. Any property purchased above £500,000 will not be eligible to benefit from the relief.

This change means that first-time buyers will now pay higher SDLT rates, increasing their upfront costs.

  1. Changes to SDLT thresholds

In a significant shift, the nil-rate SDLT threshold will be reduced from £250,000 to £125,000 from 1st April 2025. This means buyers will now start paying SDLT on purchases above £125,000 instead of the current £250,000 threshold.

This reduction will result in higher upfront costs for most buyers.

What This Means for Buyers

Residential Buyers

For those purchasing primary residences, the reduced threshold means higher costs for a broader range of transactions. Buyers should factor these increased costs into their financial plans and consider completing purchases before 1st April 2025 if possible.

Property Investors

If you’re considering adding to your property portfolio, now may be the time to act. The increased surcharge combined with the lower threshold will significantly increase transaction costs.

First-Time Buyers

The change in SDLT rates and thresholds may delay purchases for first-time buyers who are saving for deposits. This change could slow activity in the housing market, particularly for properties at the lower end of the price spectrum.

Planning Ahead

To mitigate the impact of these changes, buyers should consider:

  • Acting Before April 2025: Completing transactions before the new rules take effect could save thousands of pounds.
  • Seeking Financial Advice: Consulting a mortgage adviser or financial planner can help you navigate the changes.

Conclusion

The changes to SDLT in 2025 represent a significant shift in the property market. The reduced nil-rate threshold and higher surcharges will result in increased costs for most buyers. As solicitors, we recommend planning ahead, seeking expert advice, and ensuring you’re fully informed about the financial implications of your purchase.

If you have questions about how these changes may affect your property transaction, contact us, we are here to guide you every step of the way.

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