Understanding Stamp Duty changes from April 2025

– What is Stamp Duty?
– The History of Stamp Duty in the UK
– Changes introduced in the Autumn Budget
– Rates from 1 April 2025 = For a single residential property
– Example for a single residential property
– Higher rates for additional properties
– Rates from 1 April 2025 = For additional properties
– Example for additional properties
– Conclusion

Stamp Duty is a tax you might have to pay when buying a property or a piece of land in England or Northern Ireland. This tax applies to both freehold and leasehold properties. It also applies whether you’re buying outright or with a mortgage.  If you’re buying a property in Scotland, you’ll pay ‘Land and Buildings Transaction Tax’ instead of Stamp Duty. Whereas if you’re buying a property in Wales, you’ll pay Land Transaction Tax.

Stamp duty in the UK dates back to 1694, when it was introduced under King William III to raise funds for war against France. Initially, it applied to legal documents, newspapers, and various financial transactions.

Key Developments:

• 18th-19th Century: Stamp duty expanded to cover more items, including playing cards, insurance policies, and property transactions.
• 1853: A specific duty on property sales was introduced.
• 20th Century: Stamp duty became a significant tax on land and property transactions.
• 1997: A tiered structure was introduced, meaning higher property values attracted higher tax rates.
• 2003: Stamp Duty Land Tax (SDLT) replaced traditional stamp duty, modernising the tax system.
• 2014: The slab system was replaced with a progressive tax system for residential properties.
• 2016: A 3% surcharge was introduced for additional properties (e.g., second homes and buy-to-let).
• 2020-2021: Temporary Stamp Duty Holiday was introduced during the COVID-19 pandemic to boost the property market.

Stamp duty remains a key source of government revenue and continues to evolve with changes in policy and housing market conditions.

Changes introduced in the Autumn Budget included the measure to increase the higher rates of Stamp Duty Land Tax (SDLT) on purchases of additional residential properties by individuals and purchases of residential properties by companies from 3 to 5 percentage points above the standard residential rates of SDLT.

The measure also increases the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%.

Rates for single residential property ownership are changing as well.

In October 2024 you buy a house for £350,000. The SDLT you owe will be calculated as follows:

• 0% on the first £250,000 = £0
• 5% on the final £100,000 = £5,000
• total SDLT = £5,000

Whereas in April 2025 you buy a house for £350,000, the SDLT you owe will total £7,500 (this is £2,500 more for the same property.)

You’ll usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one.

There is a 5% surcharge on residential properties bought by companies. There is also a 2% surcharge on residential properties in England and Northern Ireland bought by non-UK residents on or after 1 April 2021. The 2% surcharge applies on top of all other residential rates of SDLT including the 5% higher rate surcharge.

If you own a house which is your main residence. On the 31 October 2024 you buy an additional residential property for £300,000. On completion of the purchase you own more than one property. The SDLT you owe on the purchase will be calculated as follows:

5% on the first £250,000 = £12,500

10% on the final £50,000 = £5,000

Total SDLT = £17,500

Whereas in April 2025 you buy a second property for £300,000, the SDLT you owe will total £20,000 (this is £2,500 more for the same property.)

Increasing the higher rates of SDLT on purchases of residential property is expected to disincentivise the acquisition of second homes and buy-to-let properties, freeing up housing stock for main home and first-time buyers. However, as rates are increasing for homeowners too, the change may just drive down property prices.

As a property investor are you reducing your portfolio acquisitions?

We look forward to working with our clients and brokers as we move through 2025 with optimism and loans faster than ever. At BIG Property Finance we are happy to receive enquiries through telephone, email or enquiry form on our website. We aim to provide indicative loan terms within hours and a potential loan offer in a matter of days.