Stamp Duty Land Tax (SDLT)

What is Stamp Duty Land Tax (SDLT) and why does it matter?

When buying a residential property in England and Northern Ireland, understanding how SDLT is calculated is crucial for managing costs of your purchase. SDLT is a tax you may be required to pay based on the price of the property. The amount you owe depends on factors such as the price you pay, whether it's your only property, and if you're eligible for any reliefs or exemptions. This tax system uses a tiered structure, meaning different portions of the property price are taxed at different rates as outlined below.

Current SDLT rates up to 31 March 2025

Under the current tax scheme, SDLT is not due on any residential property under the value of £250,000. Above this figure, you will be required to pay SDLT at the rate shown in the table below.

For example, if you purchase a property for £1,000,000. The SDLT you owe will be calculated as follows: 

• 0% on the first £250,000 = £0
• 5% on the next £675,000 = £33,750
• 10% on the next £75,000 = £7,500
• Total SDLT payable = £41,250

Key Changes in 2025

From 1 April 2025, the nil rate threshold will decrease from £250,000 to £125,000 meaning buyers will start paying SDLT on properties above £125,000 rather than £250,000. Above £125,000 you will be required to pay SDLT as shown in the table below.

Using the example above, SDLT payable will now be calculated as follows:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500

• 5% on the next £675,000 =  £33,750
• 10% on the next £75,000 = £7,500
• Total SDLT payable = £43,750

For first-time buyers, SDLT relief is available to reduce the amount of tax you pay when purchasing your first property. However, this relief is also being adjusted. As of 1 April 2025, the nil rate threshold for first-time buyers will decrease from £425,000 to £300,000. Furthermore, first-time buyers will no longer be able to claim relief on properties worth over £500,000. This decrease means that first time buyers in higher priced areas, such as the Cotswolds, wanting to get on the property ladder will face much higher costs.

Additional Property Surcharge

The most significant change for high net worth individuals is the increase in surcharge on second homes and buy-to-let properties. From 31 October 2024, the surcharge increased from an extra 3% on additional properties to 5%.

For example:

• If you purchase an investment property worth £1 million, before the budget on 30 October you would have paid an extra £30,000 in SDLT (3%).
• On 31 October 2024, that jumped to £50,000 (5%)—an additional £20,000 in tax upfront.

These changes were aimed at discouraging property investors and creating more opportunities for first time buyers to enter the market but with the decrease of the nil rate threshold for first time buyer rental properties are needed more than ever.

How These Changes Impact You

Whether you are a first-time buyer, purchasing a second home, or investing in property, the upcoming changes to SDLT mean you need to carefully plan for your transaction costs. If you are buying property before the changes take effect, you can still benefit from the higher nil rate threshold of £250,000. However, if you are planning to buy after 1 April 2025, you will need to account for the higher SDLT costs.

As we approach April 2025, it’s vital to stay informed about the upcoming changes, particularly the reduction in the nil rate threshold and the increase in the surcharge for additional properties. Whether you’re a first-time buyer or an investor, careful planning and professional advice will help you navigate the evolving landscape of property taxes.

If you are unsure about how these changes impact your specific situation, the property team at Tanners Solicitors LLP are here to guide you through the SDLT process, ensuring you make informed decisions when purchasing property. Contact us today to discuss how we can assist with your property transactions.