If you’ve ever purchased a property or are planning to do so in the future, you would have no doubt encountered Stamp Duty or SDLT. But what exactly is it? Why does it exist? And how is it changing in 2025?
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) known more commonly as just ‘Stamp Duty’ is a tax which is paid by the purchaser when buying a property, whether it’s bricks and mortar, or just land.
The amount of Stamp Duty you pay depends on two factors:
- The value of the property.
The base amount of tax owed changes depending on the price of the property and lies between 0% and 12% depending on the sale price.
- Whether you’re a first-time buyer or already own a property.
If you are buying your first property, you can claim a relief on this tax, which means you wouldn’t pay the standard rate of Stamp Duty for this transaction.
Why does SDLT exist?
In the UK, Stamp Duty has been around since the late 1600s, when it was introduced to generate war funds and was only intended to last just 4 years – but it was so efficient that it still exists today, centuries later.
The name ‘Stamp Duty’ originally referred to documents which required a physical ink stamp as confirmation that the tax had been paid, however as the tax evolved over the years, it began to be paid for different documents and items for different financial situations, until the most modern reform, where it changed to Stamp Duty Land Tax, as we know it today.
How is Stamp Duty used by the government?
- Revenue Generation:
Due to the amount of property transactions, the tax generates a significant amount of funds to fund public services and infrastructure.
- Market Regulation:
The tax can be used to regulate the property market activity, particularly in response to external financial circumstances and property supply and demand
- Encouraging Fairness:
As mentioned, less Stamp Duty is owed on cheaper properties, and reliefs for first-time buyers arguably make homeownership more accessible to those getting onto the property ladder.
The government adjusts SDLT on a regular basis in response to external economic conditions, the most recent changes are no exception.
Last October, Labour’s Autumn Budget set targeted Stamp Duty amongst an array of other tax and financial changes.
So, let’s look into the upcoming changes coming in the new financial year.
How Stamp Duty will change in 2025
Watch our video on Stamp Duty on YouTube
For single residential properties, you pay the following rates of Stamp Duty until 31st March 2025:
- Up to £250,000 – you pay 0% SDLT
- The next £675,000 – you pay 5%
- The next £575,000 – you pay 10%
- Any remaining value – you pay 12% SDLT
The autumn budget’s changes to the tax will take effect in the new financial year. Here’s how Stamp Duty is calculated from 1st April 2025:
- Up to £125,000 – you pay 0% SDLT
- The next £125,000 – you pay 2%
- The next £675,000 – you pay 5%
- The next £575,000 – you pay 10%
- Any remaining value – you pay 12% SDLT
How is Stamp Duty calculated on a purchase?
If, for instance, you were to buy a house after April 2025 for £330,000, the amount of tax owed is determined as follows:
- 0% on the first £125,000
- 2% of second £125,000 = £2,500
- 5% on remaining £80,000 = £4,000
- Total SDLT owed = £6,500
With that out of the way, let’s look at the other factors which impact the Stamp Duty you pay:
First-time buyer relief
If you are a first-time buyer, you are entitled to claim a relief (discount) on the Stamp Duty you pay. Just as the rates mentioned above, so too is this relief changing in the new financial year as a result of the autumn budget.
For property purchases up to 31st March 2025:
- You pay no SDLT up to the sale value of £425,000
- You pay 5% SDLT on the portion from £425,001-£625,000
- If the property sale price is more than £625,000, you can no longer claim the relief and will pay the standard rate of SDLT.
From the new fiscal year, the minimum threshold for SDLT as well as the maximum property sale value to qualify for the relief will change.
For property transactions on or after 1st April 2025:
- You pay no SDLT up to the value of £300,000
- 5% on the portion from £300,001-£500,000
If the sale price is over £500,000, you can no longer claim the relief and are still entitled to pay the standard rate of Stamp Duty.
Rates for additional homes
When purchasing an additional property, i.e. a property that you will not live in, such as an investment or BTL property, you will pay a higher rate of Stamp Duty, typically 5% on top of the current rates of SDLT.
What should you be aware of?
So, what does this all mean for you?
Even if you are a first-time buyer, the rates of Stamp Duty and its implications are something to keep an eye on, especially as property prices and legislation are perpetually changing.
What should you be aware of if you are planning to purchase a property?
- Check your eligibility:
If you are a first-time buyer, you could benefit from reduced, or no SDLT on a property purchase, so familiarise yourself with the relief figures.
- Factor it into Your Budget:
Consider your budget and the amount of Stamp Duty that you would expect to pay, do this before proceeding with any sales so you aren’t caught off guard.
- Consider timing:
If you’re thinking about buying, recent changes might mean now is the right time to take advantage of lower rates.
And remember, consulting a financial advisor or solicitor can help you navigate the complexities of property sales.
Consider the fact that the current SDLT brackets will change in the new financial year, so be sure to keep this in mind if you are progressing with a sale in the new year as the tax is due on the completion of the sale.
Conclusion
Although Stamp Duty may be a frustrating extra expense, it is important to understand how they are changing and how your circumstances may affect the amount of tax you pay.
Thank you for reading.
Continue reading our blog to stay up to date with changes affecting the property sector.
If you’d like to speak to one of our team about selling a property, you can contact us at 01293 529993, or email us at: info@connectuksales.co.uk