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From today (23/09/2022) the rates in which Stamp Duty Land tax (SDLT) will be charged on property transactions in the UK have been changed to reduce the amount of SLDT payable on the majority of transactions.

What is stamp duty land tax?

When purchasing a property, a tax that you may have to pay on top of the property price is SDLT – depending on the value of the property you are purchasing.

The previous rates were:

• Nil for the value between £0 and £125,000
• 2% of the value for the value between £125,001 and £250,000
• 5% of the value for the value between £250,001 and £925,000
• 10% of the value for the value between £925,001 and £1.5m
• 12% of the value for any value exceeding £1.5m

For example, if you were to purchase a property for £300,000, you would pay 2% on £125,000 of the property value and 5% on £50,000 of the property value – giving you an SDLT charge of £5,000.

However, it should be noted that the current nil-rate threshold for first-time buyers is £300,000 (meaning first time buyers will not pay any SDLT on the value of the property up to £300,000). This exception is an incentive to help first time buyers onto the property market, and would mean the same property above, to a first time buyer, would come free of SDLT. First time buyers were only able to claim this relief, however, against properties less than or equal to the value of £500,000.

What are the changes?

In all, the Chancellor has announced three major changes:

• The nil threshold for SDLT has risen from £125,000 to £250,000
• The nil threshold for SDLT for first time buyers has risen from £300,000 to £425,000
• The value of the property that first time buyers can claim relief against has risen from £500,000 to £625,000

This is a permanent change to stamp duty, effective today.

How will the changes affect my purchase?

While not as drastic as the changes that were introduced during the stamp duty holiday, many purchasers are likely to pay less tax on their transactions.

Take our aforementioned £300,000 property purchase, for example. The previous regime would mean a non-first time buyer would pay £5,000 in SDLT. Under the new regime however, £250,000 of the value is now exempt. Therefore, the buyer would only pay 5% on the remaining £50,000 of the property value, revealing an SDLT charge of £2,500. This represents a 50% saving on SDLT for our hypothetical buyer.

If you have any questions regarding how the changes will impact your ongoing purchase, or would like to speak to our Residential Property Team about assisting you with a sale or purchase, please contact us on 01603 610911 or by emailing us – we would be happy to assist.