Stamp Duty Land Tax (SDLT) changes

On 30 October, the new Labour Government announced changes to Stamp Duty Land Tax. Sam Stent, Associate Tax Advisory Partner, discusses the changes.

Stamp Duty was introduced in 1694 to raise funds for the war against France by requiring official documents to be stamped.  The measure was only meant to last four years but roll forward 330 years, and SDLT is still here and now raises nearly £12 billion per year.  So, I think we have to accept that it’s here to stay.

At first glance, the Budget changes to SDLT all seemed fairly innocuous, with no immediate changes to the standard SDLT rates.  Both the residential and non-residential rates will remain exactly the same for around the next 5 months or so, and then, as we already knew from previous announcements, the residential rates will increase slightly from 1 April 2025 (including the rates for first time buyer’s relief).

Full details of the current residential rates up to 31 March 2025 and the new rates from 1 April 2025 onwards can be found here.

The government announced it will increase the single rate of SDLT payable by companies acquiring dwellings worth more than £500,000.  This rate is up from 15% to 17% although there remain a number of exemptions to this punitive rate that apply to property rental businesses and developers, employee-occupied property and farmhouses among others.

And although it was included in the Labour manifesto, the Chancellor did not go ahead with the proposed increase in SDLT for non-resident purchasers of residential property who were expecting their surcharge to go up from 2% to 3%.  This may of course still come later .

Changes to SDLT rates for second and additional dwellings

The big SDLT announcement on Budget Day was an increase in the surcharge rate from 3% to 5%.  This rate applies on top of the standard SDLT rates for purchasers of second or additional dwellings (and also applies to all corporate purchasers).

This announcement by Rachel Reeves makes it clear that the Government intends to disincentivise investment within certain sectors of the property market by increasing the cost of purchasing second homes and buy to let properties.  It is assumed that by increasing the higher rates of SDLT the Government hopes that housing stock will be freed up for main home and first-time buyers.

What is the impact of SDLT rates?

We can see from the table below the impact of the recently announced changes.  SDLT on a buy to let property worth £250,000 would have cost you £7,500 before the Budget.  In a few months’ time that will have doubled to £15,000.

The SDLT on a second home priced at £1 million increased by £20,000 overnight as a result of the SDLT changes announced on 30 October, and are set to rise further next year.

Planning is key

This means that SDLT planning is now more important than ever. Particularly if you:

• have inherited a rental property and now want to buy a place to live;
• want to buy a holiday home either in the UK or overseas;
• are buying jointly with someone else who already owns a property (e.g. children who are trying to get on the property ladder and are being helped out by their parents);
• are buying a second home and are married to, or in a civil partnership with, someone who owns another property;
• wish to invest in buy to let property for retirement planning purposes; or
• want to transfer residential property into a Family Investment Company.

This increase in the surcharge rate is likely to affect them all.

However, all is not lost.

Speaking to an SDLT expert can still result in significant SDLT savings.  For example, ensuring that acquisitions of mixed-use property are correctly identified could mean that the higher SDLT rates are avoided (and the lower, non-residential SDLT rates are applied).

Please get in touch with Sam or one of the Tax Advisory team if you would like to discuss any of the issues in this article or to talk through an upcoming property purchase – and it might just save you a few pounds!