Recent changes to Stamp Duty Land Tax (SDLT) will have an impact on property buyers, particularly those purchasing additional homes, buy-to-let properties, or making larger purchases through corporate entities.
Effective from 31 October 2024, the surcharge for Higher Rates for Additional Dwellings increased from three per cent to five per cent.
Additionally, from April 2025, the temporary SDLT threshold increase will end, reverting the threshold for general SDLT from £250,000 back to £125,000.
From April 2025, first-time buyers are also facing changes, with decreases to the Stamp Duty threshold, down to £300,000 from £425,000.
These changes may seem complex, but with the right advice and planning, they do not have to derail your property plans.
Higher rates for additional dwellings
The surcharge increase from three per cent to five per cent means buying a second home or investment property is now a great deal more expensive.
For example, a £300,000 property now incurs an SDLT surcharge of £15,000, compared to £9,000 under the previous rate.
“Before committing to a purchase, it is important to fully understand the financial implications,” says Heather Bright, Partner at Moore Thompson. “For many, this could mean reviewing their budgets and exploring whether the investment still fits their long-term plans.”
If you are unsure about affordability, consider working with our accountants to re-evaluate your cash flow and property strategy.
Impact on first-time buyers and main residence purchasers
The Government’s intention behind these changes is to create opportunities for first-time buyers and those purchasing a primary residence, with an estimated 130,000 more transactions expected over the next five years.
However, the reversion of the SDLT threshold from £250,000 to £125,000 in April 2025 will also impact first-time buyers.
“If you are buying your first home or main residence and have found a property below £250,000, moving quickly before April could save you thousands,” advises Heather. “On the other hand, if you are not ready to proceed immediately, plan for the added costs and adjust your savings goals.”
Corporate buyers face higher costs
For corporate entities purchasing properties over £500,000, SDLT has increased from 15 per cent to 17 per cent.
This change makes it crucial to structure investments carefully.
“Businesses and investors need to think strategically about how they approach property purchases,” explains Heather. “There may be tax reliefs or exemptions available that could reduce the overall SDLT liability, but they are often complex and require careful planning.
“For example, Multiple Dwellings Relief (MDR) applies when a buyer purchases multiple residential properties in a single transaction or as part of a linked transaction.
“Instead of calculating SDLT based on the total purchase price, the tax is calculated on the average price of each property, then multiplied by the number of properties.
“This can reduce the overall SDLT liability, especially for investors or developers purchasing multiple units in one go.”
If you are planning a corporate purchase, we can help ensure you are maximising any available opportunities to offset costs.
How to approach property investments
The changes to SDLT mean that investors and homebuyers alike should revisit their financial plans.
“Don’t wait until you are at the point of purchase to factor in these changes,” says Heather. “For those looking to build or expand a property portfolio, consider whether the properties you are interested in will deliver the returns needed to justify the higher taxes.”
Additionally, this is a good time to reassess your existing portfolio. Selling underperforming properties or refinancing could provide the capital to navigate these increased costs.
With these changes already in effect and further updates on the horizon, there is no better time to act.
Our team is here to help you when it comes to purchasing properties and making sure that the changes to SDLT do not become an issue.
If you would like to discuss your property plans or understand how these changes affect you, get in touch with us today.
HEATHER BRIGHT / PARTNER / heather@mooret.co.uk / SPALDING OFFICE