Stamp duty changes in 2025: What property buyers need to know

The Government has confirmed that property buyers will no longer benefit from stamp duty cuts after 31 March 2025. This change follows the introduction of the Stamp Duty Land Tax (Reduction) Bill 2022-23.

What is stamp duty?

Stamp Duty Land Tax (SDLT) is a tax charged to buyers of land and property, calculated based on the value of the property. As of now, SDLT applies only to properties priced above £250,000. Until March 2025, the SDLT rates are as follows:

• 0% up to £250,000
• 0% up to £425,000 for first-time buyers
• 5% for properties valued between £250,001 and £925,000
• 5% for first-time buyers for properties valued between £425,001 and £625,000 (over £625,000, no relief applies)
• 10% for properties valued between £925,001 and £1.5m
• 12% for properties valued above £1.5m

Prior to the cuts, SDLT applied to properties valued from £125,000, meaning a larger proportion of property transactions were subject to the tax.

What happens after 31 March 2025?

After 31 March 2025, the SDLT thresholds and rates are expected to revert to their pre-2022 levels. This means the tax would apply to properties valued over £125,000 once again. The rates will be:

• 0% up to £125,000
• 0% up to £300,000 for first-time buyers
• 2% for properties valued between £125,001 and £250,000
• 5% for properties valued between £250,001 and £925,000
• 5% for first-time buyers for properties valued between £300,001 and £500,000 (over £500,000, no relief applies)
• 10% for properties valued between £925,001 and £1.5m
• 12% for properties valued above £1.5m

The return to previous rates could significantly increase costs for buyers. According to HMRC data, SDLT without the recent cuts generated approximately £12 billion in the year ending September 2022. While the temporary reductions aimed to revive a sluggish property market, the higher thresholds and rates are set to return as a key source of government revenue.

Higher rates for additional properties

You will usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one. However, you will not pay the extra 5% SDLT if the property you’re buying is replacing your main residence and that has already been sold. If you have not sold your main residence on the day you complete your new purchase, you’ll have to pay higher rates because you own two properties.

What does this mean for buyers?

If history is any indicator, the return to higher SDLT rates may lead to a rush in property transactions as the 2025 deadline approaches. To avoid potential delays and ensure you benefit from the current SDLT relief, prospective buyers are advised not to delay their purchase process. Acting early in the new year could save thousands of pounds in SDLT.

Understanding SDLT rates and thresholds can help you:

• Budget effectively: Factor in SDLT when calculating the total cost of your property purchase.
• Maximise reliefs: Take advantage of first-time buyer relief or other exemptions, where applicable.
• Plan for upcoming changes: Be aware of the new rates and thresholds coming into effect from 2025.