Today the Chancellor Rachel Reeves announced an immediate change in the rate of Stamp Duty Land Tax (“SDLT”) on the purchase of additional residential properties. These measures will take effect for all transactions entered into on or after 31 October 2024.
When does the higher rate apply?
When an individual purchases an additional residential property then SDLT is currently charged at a rate which is 3% higher than the standard residential rate, this is known as the 3% surcharge rate. From 31 October this rate will increase by 2 percentage points, and the new rate will be 5% higher than the standard residential rate.
This higher rate generally applies to purchases of investment properties, second homes and holiday homes. However, it can also apply where someone is buying a new home but hasn’t managed to sell their previous home. They would initially pay SDLT at the higher rate but provided that they sell their old home within 3 years of the purchase of the new home they should be able to reclaim the additional SDLT which was paid at the higher rate.
This higher rate also applies to companies purchasing residential property which is used as part of a genuine property business such as property rental or property development.
There is also a higher rate of SDLT for companies buying residential property worth more than £500,000 which is not used as part of a property business. This rate is currently 15% but will now increase to 17%.
When will these changes take effect?
This new higher rate applies to all transactions entered into on or after 31 October 2024. If contracts have been exchanged before 31 October but the transaction has not completed by that date, then transitional rules may apply and the transaction may be charged at the previous rate provided that there has been no change to the contracts between exchange and completion.
Changes to the Stamp Duty Land Tax threshold from 1 April 2025
At the moment the SDLT threshold for residential property is £250,000, the rate of 5% therefore applies in respect of all consideration up to £250,000. This threshold will revert to £125,000 from 1 April 2025. As a result, from this date, the first £125,000 of the purchase price will be charged at 5% while amounts between £125,000 and £250,000 will be charged at 7%. As a greater proportion of the consideration will be charged at a higher rate this will increase the SDLT bill further.
Please contact Pauline Hudd to arrange a consultation to discuss your Stamp Duty Land Tax matters.
