Stamp Duty – what’s the latest?
Amidst the whirlwind of government announcements, re-announcements, interest rate dramas, Christmas mania, and the cost of living crisis, you’d be forgiven for not being able to keep up with the stamp duty rules too!
So here’s a guide on the current stamp duty rules for residential property purchases in England and Northern Ireland. Please follow the links you’d like to find out more regarding the equivalent property tax rules for Scotland or Wales instead.
A quick reminder of what Stamp Duty actually is…
Stamp Duty Land Tax (SDLT) is simply a tax payable when buying or gaining an interest in a property. The tax is a percentage of the property value. There are several bands of tax, and your property purchase will more than likely fall across more than one band. It’s fair to say that it’s probably the biggest cost that you’ll need to budget for when buying a new home, so it’s a good idea to get a grasp of how it’s calculated if you’re thinking of buying a home in the near future.
So what has changed?
During the now infamous “mini-budget” on the 23rd September 2022, the Chancellor of the Exchequer at the time, Kwasi Kwarteng, unveiled the Stamp Duty Land Tax (Reduction) Bill, which set new rates of stamp duty for residential property purchases.
These changes were initially understood to be permanent, however, as part of the Autumn 2022 Budget on the 17th November, the subsequent Chancellor Jeremy Hunt announced that the bill was to be amended, and these reduced tax rules would only be a temporary measure until March 31st 2025.
Therefore, until March 2025, the following rules apply:
Standard Stamp Duty Rates
- 0% tax is payable on the First Threshold £0-£250,000
- 5% tax is payable on the Second Threshold £250,001-£925,000
- 10% tax is payable on the Third Threshold £925,001-£1,500,000
- 12% tax is payable on the Fourth Threshold £1,500,000 and over
First Time Buyer Rates
If you’re buying your first home, as long as your new home is valued at £425,000 or less, you’re eligible for a discount on your stamp duty tax bill. Instead of the above, the following rules apply:
- 0% tax is payable on the First Threshold £0-£425,000
- 5% tax is payable on the Second Threshold £425,001-£625,000
NOTE – when buying a property jointly, the tax position is based on the “best off” person, so to speak. What is meant by this is, if a First Time Buyer is purchasing a property with someone who has owned a property before, the First Time Buyer will lose their eligibility for a discount and the Standard Rates would apply.
Additional rates for owning multiple properties
If you’re fortunate enough to own more than one property, you’ll pay an additional rate of 3% on top of the standard rates when buying an additional property.
It’s important to get proper tax advice here, but the general rule is, if you are not replacing your main residence with the new property purchase, and will end up owning two or more properties upon completion of your purchase, the additional 3% rate is normally payable.
Other Stamp Duty Rates
There are a couple of other scenarios where the tax bill may vary. Those living overseas who would like to purchase a property in England or NI may need to pay an additional 2% on top of the standard stamp duty rates.
And the 3% additional rate also applies to anyone purchasing a property through a limited company.
In order to take advantage of the current stamp duty tax rates, your property purchase will need to complete on or before 31st March 2025 (as in, money paid, keys collected and feet up with a cup of tea in your new home!).
It’s expected that after that date, the government will simply revert back to the old stamp duty rules. But if the last few years have taught us anything, it’s that you can never predict what will happen next!
If this has got you thinking about moving before the new deadline, we’re here to help. Get in touch and we’ll talk you through your options, wherever you are in the UK. Or sign up to our monthly newsletter, to keep your finger on the pulse.
Helen Peel – 15th December 2022
