Stamp Duty Land Tax (SDLT) is a complex property tax paid by buyers on purchases in England and Wales. Here’s an attempt to make a complicated subject a little simpler and to help you understand its rates, recent changes, and implications, especially if you're an investor or purchasing a second property.
Key SDLT Rates for Homebuyers
- First-Time Buyers: Pay 0% SDLT on properties up to £425,000. This initiative aims to ease the burden on new buyers for properties worth £625,000 or less but this will be changed from 31st March 2025.
- First Time Buyers: Pay 0% SDLT on properties up to up to £300,000. Again this initiative aims to ease the burden on new buyers for properties worth £500,000 or less and this is effective from 1 April 2025 onwards.
Main Residence: If this is your primary home, you’ll pay SDLT based on the following rate structure up to 31 March 2025:
- Up to £250,000: 0%
- The portion from £250,001 to £925,000: 5%
- The portion from £925,001 to £1.5 million: 10%
- The portion above £1.5 million: 12%
The rates from 1 April 2025 are as follows:
· Up to £125,000: 0%
· The portion from £125,001 to £250,000: 2%
· The portion from £250,001 to £925,000: 5%
· The portion from £925,001 to £1.5 million: 10%
· The remaining amount above £1.5 million: 12%
SDLT Rates for Additional Properties
If you already own a property worth £40,000 or more anywhere in the world, buying a second property for use as a rental business or as a property developer or trader means paying a surcharge on top of the standard rates set out above for a main residence. This surcharge recently increased:
- Previous Rate: 3% surcharge on each tier.
- New Rate: 5% surcharge on each tier, effective from the latest budget update on 30th October 2024.
For example, on a second property being purchased between now and 31st March 2025:
- Up to £250,000: 5% (0% + 5%)
- £250,001 to £925,000: 10% (5% + 5%)
- £925,001 to £1.5 million: 15% (10% + 5%)
- Above £1.5 million: 17% (12% + 5%)
As such, it has become more expensive for investors or traders to purchase new properties. However as this is a cost of purchase we suspect this will be built in to the numbers and ultimately this means prices will be reduced to reflect the extra amount of SDLT payable.
Changes for Corporate Purchases or Non Natural persons (i.e. not a rental business or trader)
If a company or firm purchases a dwelling worth over £500,000, they now face a higher SDLT rate (This was introduced to cover companies buying properties for their “owners” to use for their own occupation):
- Previous Rate: 15%
- New Rate: 17%
This change reflects efforts to address housing availability by reducing speculative purchases in the high-end market, and also to reduce overseas investors purchasing properties for their own use but leaving them empty.
As an example, a company purchasing a £1 million property would now incur £170,000 in SDLT, up from £150,000. Note this does not apply to rental businesses or property traders wherever they are located.
Note also these corporates may have to pay ATED (Annual Tax on Enveloped Dwellings) in addition.
Impact on International Buyers
International investors face even higher rates. If you’re a non-UK resident buying a property in the UK, an additional 2% surcharge applies to each rate band. Non-resident purchasers of high-value properties should now budget for up to 19% SDLT.
Reliefs and Exemptions
SDLT does offer some reliefs for specific situations:
- Probate Properties: Relief applies if you’re buying a property from an estate or one needing a light refurbishment, under certain conditions. If you can satisfy the conditions and sell on to an end user then the SDLT is reduced to 0%.
- Rates for non-residential and mixed land and property: If buying 6 or more residential properties in a single transaction, or mixed with commercial property you might qualify for a lower SDLT rate with 0% up to £150,000, 2% on the next portion from £150,001 to £250,000, and then 5% on the remaining portion above £250,000.
Example: SDLT Calculation
Suppose a UK-resident investor purchases a £500,000 residential property using a company but to use as part of a rental business. With the new 5% surcharge, here’s what they would pay between now and 31st March 2025:
- On the first £250,000: 5%
- On the next £250,000: 10%
- Total SDLT: £37,500
Navigating SDLT Complexity
SDLT can quickly add up, and small changes significantly impact your purchase budget. It's crucial to consult with SDLT specialists for specific situations, like corporate purchases, international investments, or complex scenarios with reliefs.
At Rocket Property Management, we work with various lawyers and accountants who give advice on all aspects of SDLT when acquiring properties, so we source the properties and the specialists then give advice on the latest rules. Whether you’re a first-time buyer, investor, or adding to your property portfolio, understanding SDLT is key to making informed decisions.
Contact Rocket to discuss your property investment considerations to make sure your purchases are both compliant and strategically sound.
