Starting April 1, 2025, significant changes to the Stamp Duty Land Tax (SDLT) will come into effect in England.
These changes will impact all homebuyers, but particularly first-time buyers. We have prepared a summary of what to expect and how the new measures could affect you if you are planning to purchase a new property within the next few months.
Why Are These Changes to SDLT Happening?
The adjustments are a rollback of the measures introduced in September 2022. The Government announced these changes in their October 2024 Budget. Whilst some changes came into effect immediately, some will come into effect on the 1 April 2025.
Key Changes coming into force from 1 April 2025
1. Reduction of the Nil-Rate Band
- Current rule: No SDLT is payable on the first £250,000 of the purchase price.
- From April 2025: The nil-rate threshold for residential properties will revert to £125,000 and SDLT will be payable at 2% on the purchase price between £125,001 to £250,000.
2. First Time Buyer Relief
- Current rule: First time buyers are exempt from paying SDLT on homes priced up to £425,000, with the relief being applicable on properties with a purchase price up to £625,000.
- From April 2025: The nil-rate threshold will drop to £300,000 from £425,000 and the cap on qualifying properties will be lowered to £500,000.
How Will Stamp Duty Land Tax Changes impact Buyers?
- First-time buyers are among those most affected by these changes, as properties priced between £300,001 to £425,000 will no longer be exempt from SDLT. This change is going to be felt most by those first-time buyers trying to enter the London housing market, where average property prices are much higher. From the 1st April 2025, a first-time buyer purchasing a property for £625,000 will pay an additional £11,250 in SDLT.
- With the nil-rate halved, all homebuyers will experience increases on the tax payable when purchasing a property for over £125,000. For all properties over £250,000, it will mean an additional £2,500 SDLT being payable.
How to Prepare
Calculate Your SDLT
Use the updated SDLT calculator on the Government website to understand how much tax you'll owe based on the new rates. If you are an investor, you must ensure that the higher acquisitions costs and the higher SDLT surcharges (up from 3% to 5% as of 31 October 2024) have been factored into your returns.
Plan Your Purchase
If you're a first-time buyer or planning to buy an additional property, consider completing your purchase before April 1, 2025, to benefit from the current thresholds. A leasehold purchase takes on average between 10-12 weeks to compete and therefore it is highly recommended that as a perspective buyer, you start the process asap.
Seek Professional Advice
Consult with a solicitor or tax advisor to navigate these changes effectively. Legal and financial professionals can ensure that you understand any tax complications fully and navigate the same effectively.
The upcoming changes to SDLT are significant and will affect many buyers. By understanding these adjustments and planning accordingly, you can better manage your property purchase and avoid unexpected costs. For more personalised advice on SDLT calculations and deadlines, please contact Elizabeth Ntilo or Sarah Pennington in our Residential Real Estate team who will be able to assist with every aspect of your transaction and in doing so, can provide you with detailed tax calculations under both pre and post 1 April 2025 SDLT rates.
