SDLT increases - what’s the latest?

Temporary increase

To give the housing market a boost, back in September 2022 the residential 0% band was temporarily increased to £250,000. This limit will revert to £125,000 for contracts which complete on or after 1 April 2025, with a particularly harsh knock-on effect for first-time buyers. Stamp duty land tax (SDLT) only affects properties in England and Northern Ireland. There are no changes to the land taxes for properties in Wales or Scotland.

Remember that the lower rates of SDLT that apply to non-residential property also apply to the purchase of a property that’s mixed use, i.e. residential and non-residential, e.g. a shop with a flat above.

Decrease in 0% band

The changes create a new 2% band for properties costing between £125,001 and £250,000. From 1 April 2025 buying a property will add up to £2,500 SDLT to your costs. Plus, those who don’t intend to occupy the property as their home will also have to pay a 5% SDLT surcharge.

First-time buyers

There’s some good news if you’re buying your first home. SDLT relief reduces the SDLT charge by up to £5,000. To qualify, all of the purchasers must not ever have owned a dwelling and it must be a single dwelling.

Parents wishing to help their children get onto the property ladder should assist with a loan rather than owning any equity in the property, otherwise the relief won’t apply.

The £5,000 relief won’t apply where the property costs more than £500,000. This is a change to the limit of £625,000 for purchases completed before 1 April 2025.

Example. Amy is buying her first home for £400,000 and hopes to make the 31 March 2025 deadline. If the chain manages it, she won’t suffer any SDLT. If not, her SDLT will be £5,000 (£400,000 - £300,000 @ 5%). If Amy’s house costs £625,000, the impact of the reduced cliff edge is dramatic, with an extra £11,250 SDLT charge as no first-time buyer relief applies. Instead of a reduced SDLT charge of £10,000 (£625,000 – £425,000 @ 5%), she’ll face an excruciating cost of £21,250 (£125,000 @ 2%) + (£375,000 @ 5%).

SDLT planning

As SDLT does not apply to any part of the purchase price relating to chattels, e.g. carpets, white goods and free-standing furniture, allocating a small portion of the consideration to chattels could bring the amount liable to SDLT below a useful threshold, particularly for first-time buyers.

If you’re aged between 18 and 40, consider using a Lifetime ISA to help with buying a property. The government contributes up to £1,000 per year to add to your ISA account which can be used to purchase a first home