Stamp Duty Land Tax Rate Changes

Somewhat unexpectedly, the government has increased the Higher Rate for Additional Dwellings (HRAD), commonly known as the SDLT surcharge for second homes, by 2%. This raises the rate from 3% to 5%, effective from 31 October 2024 – the date of the recent Budget announcement.

This deadline leaves no room for manoeuvre. Transactions where contracts have been exchanged on or before this date will fall under the previous rules. However, for any transactions not exchanged by this deadline, the new rules will apply.

SDLT Rate Changes

The 2 percent points increase in the HRAD surcharge on Stamp Duty Land Tax (SDLT), raising it from 3% to 5%, aims to provide a competitive advantage to those purchasing their first home or moving house over second-home buyers, landlords, and businesses acquiring residential property.

Additionally, there is already an extra 2% SDLT surcharge applicable when the buyer of a residential property is a non-UK resident, such as non-resident companies or overseas-based individuals. This means that non-UK residents purchasing a dwelling could face effective SDLT rates as high as 17%. This is calculated based on the highest residential SDLT band of 12%, plus the 5% HRAD surcharge for second homes or corporate purchases, and the 2% surcharge for non-UK residents.

For example, if an individual purchases a second home as an investment or buy-to-let (BTL) property for £1 million, this property would be subject to the new SDLT surcharge rates. Since it is an additional property and not replacing their main residence, the following SDLT would apply:

In this simple example, the 2% increase to the existing 3% surcharge results in an additional £20,000 SDLT. For non-UK residents, an extra 2% surcharge applies on top of the 5%, and both the 5% surcharge and the 2% non-resident surcharge apply to the entire property value without a nil rate band. These surcharges are then added to the existing SDLT band rates.

The single rate of SDLT charged on dwellings costing more than £500,000, when purchased by corporate bodies, has increased by 2 percentage points from 15% to 17%, effective from 31 October 2024. Various reliefs may be available for corporate property purchases to remove or reduce this charge, but as with all tax matters, the SDLT due will depend on the specific circumstances of each transaction.

Previously Proposed SDLT Scheduled Changes

The government has confirmed that the previously scheduled changes to Stamp Duty Land Tax (SDLT) will proceed as planned on 31 March 2025. These changes, initially set by the previous administration, were not altered in the recent Budget announcements. Key adjustments include:

• The nil rate threshold for dwellings is currently £250,000 but will return to the previous level of £125,000.
• The nil rate threshold for first-time buyers which is currently £425,000 will return to the previous level of £300,000.
• The maximum purchase price for which First-Time Buyers Relief can be claimed is currently £625,000 and will return to the previous level of £500,000.

Whilst the upcoming changes to Stamp Duty Land Tax (SDLT), are effective from 31 March 2025 and given that the home-buying process in the UK typically takes between 5 to 6 months – from mortgage approval to completion, first-time buyers aiming to benefit from the current SDLT thresholds should act promptly. Initiating the process now increases the likelihood of completing the purchase before the new rates take effect in April 2025.

Get in Touch

To understand how these SDLT changes might affect you and to explore potential reliefs that could reduce your liability, find out more about our SDLT services. Our experts provide tailored advice and guidance to help you navigate these changes with confidence and ensure you fully understand your obligations and opportunities.

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