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The Window is Closing on the Favourable Stamp Duty Rates

The Current Stamp Duty Land Tax Rates are Changing and the Clock is Ticking!

Did you know that the current Stamp Duty Land Tax Rules (SLDT) are only temporary?

At the end of March 2025, the housing market in England and Wales will face significant changes. The temporary Stamp Duty Land Tax (SDLT) rules, which were brought in to stimulate the housing market following the COVID pandemic, have provided much-needed relief to homebuyers over the past few years and are set to revert to their pre-pandemic structure. This change is expected to have a substantial impact on the housing market, particularly in London.

Before we get into the detail, I have to include this disclaimer: Before these changes come into effect, we will have a General Election in the UK and taxation on housing has always been tinkered with at almost every budget. So, no matter who is in power, expect these rules to change,

Stamp Duty Land Tax or SDLT for short is a tax paid by the buyer of houses, flats, land and buildings over a threshold price. This tax is paid by you to HM Revenue and Customs, usually by your conveyancing solicitor as part of the conveyancing process.

Current Temporary SDLT Rules

Under the current temporary rules:

  • Residential Properties: No SDLT is payable on properties up to £250,000. First-time buyers enjoy an even higher exemption, with no SDLT on properties up to £425,000.
  • Additional Property Surcharge: An additional 3% SDLT surcharge applies to the entire purchase price for buying additional residential properties, such as second homes or buy-to-let investments.
  • Non-Residential and Mixed-Use Properties: The standard rates apply, with 0% on the first £150,000, 2% on the portion between £150,001 and £250,000, and 5% on the portion above £250,000.

Changes from April 2025

Starting from April 2025, the SDLT rules will revert to the pre-pandemic structure:

  • Residential Properties: The nil-rate threshold will return to £125,000. First-time buyers will see their exemption revert to £300,000 for properties up to £500,000. The rates will then be 2% on the portion between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% between £925,001 and £1.5 million, and 12% on anything above £1.5 million.
  • Additional Property Surcharge: The 3% surcharge on additional properties will continue to apply.

Impact on the Housing Market

These changes are likely to have several effects on the housing market:

  • Buyers of Lower-Priced Properties: Those looking to purchase homes under £250,000 will face higher SDLT costs, as the nil-rate threshold decreases to £125,000.
  • First-Time Buyers: While still benefiting from some relief, first-time buyers will see their SDLT exemptions reduced, increasing their overall costs.
  • Higher-Priced Property Buyers: Buyers of more expensive properties will face higher SDLT liabilities due to the return to higher rates on property portions above £250,000.
  • Additional Property Buyers: Investors and buyers of second homes will continue to incur the additional 3% surcharge, maintaining higher overall purchasing costs.

Specific Impact on the London Housing Market

The London housing market, characterised by its high property prices, will particularly feel the impact:

  • Increased Costs: With average property prices in London significantly higher than the national average, the higher SDLT rates will affect a large proportion of transactions.
  • Market Cooldown: The increased costs may deter buyers, potentially leading to a cooling of the market and a slowdown in property transactions.
  • Investment Decisions: Investors may reconsider their decisions, especially for buy-to-let properties, due to the continuing 3% surcharge and higher overall SDLT costs.

Conclusion

The upcoming changes to SDLT rules mark a significant shift for the housing market in England and Wales. Buyers, especially in high-value markets like Greater London, should be prepared for increased costs and consider their options carefully before the favourable rules expire at the end of March 2025. At Triangle Legal Services Limited, we are here to help you navigate these changes and make informed decisions. Contact us today for expert advice and support.

For a free, no obligation discussion about your conveyancing requirements, simply either call us now on 020 3393 2774, email us on  enquiries@trianglelegalservices.co.uk  or complete a Free Online Enquiry and we will explain all of the options available to you.

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