On 1st April 2025, significant changes are set to take effect regarding Stamp Duty Land Tax (SDLT) in England and Northern Ireland as part of the government changes to raise an additional estimated £90 million in 2025-26 and £170 million in 2026-27 in exchequer revenue. These stamp duty adjustments will affect first-time buyers, individuals who are moving homes, and landlord investors.
Changes for First-Time Buyers
Under the current system, first-time buyers benefit from significant SDLT relief. For homes up to £425,000, they do not have to pay any SDLT, while homes valued between £425,001 and £625,000 are subject to a reduced 5% rate. However, starting in April 2025, the following applies:
Because these alterations could have a notable financial impact on those hoping to buy their first home, mortgage advisers can expect a busy period of advice as new mortgage borrowers required advice on how to meet the new costs within their purchasing plan after April 2025.
Implications for Home Movers
For those who are moving into a new home, but are not first time buyers, the changes to SDLT also bring about significant shifts.
Currently, individuals who are moving to a new residence pay no SDLT on properties valued up to £250,000. But with the changes on April 1st 2025, this drops to just £125,000 – so properties priced between £125,001 and £250,000 will be subject to a 2% SDLT charge.
For the remainder of the property price above £250,000 and up to £925,000, a 5% rate will apply.
Implications for landlord investors
Currently, investors (which is classed for the purpose of Stamp Duty as people who own more than one property) pay a 5% surcharge over the bandings of a home mover, so landlord investors were previously liable for a 5% stamp duty on properties priced from £1 up to £250,000. From April 2025, the threshold drops down in line with the home movers threshold, so the 5% rate is applicable on properties priced from £1 up to £125,000.
The next £125,000 (from £125,001 to £250,000) is liable for a 7% stamp duty tax and the part of the property value above £250,000 is chargeable at a 10% rate.
As an example, a £350,000 property would be taxed at
5% x the first £125,000 = £6,250 +
7% x the next £125,000 = £8,750 +
10% x the remaining £100,000 = £10,000.
Total = £25,000
See the HMRC page and examples here
How Will These Changes Affect the Property Market?
The modifications to SDLT obviously affect all buyers, first-time buyers and those moving homes as they reconsider their plans. However, for those purchasing homes below the new first-time buyer thresholds, the reductions in SDLT relief has already encouraged earlier moves in the lower end of the market where buyers have acted quickly to take advantage of the current exemptions. Ultimately, stamp duty charges are factored into the property prices.
What Should Buyers Do Now?
Proper advice from a mortgage adviser and a solicitor is critical in such markets. First time buyers, subsequent movers and landlord investors would all benefit from a review of their finances form a professional mortgage advisor, who may be able to reveal alterative landing options and ways to structure the loan in order to meet the increased tax liability – so that plans to own a property or move home can still be achieved. A solicitor can help buyers understand how the new SDLT rules apply to the specific type of property and assist in making the purchase as cost-effective as possible.
Conclusion
As the implementation of the 2025 SDLT changes approaches, it’s essential for prospective property buyers to understand the implications of the new rules. For first-time buyers, the reduction in tax relief could mean higher taxes, especially for those buying homes above £300,000. Home movers will also face increased costs, particularly for properties priced between £125,001 and £250,000, which means that landlords’ thresholds for their 5% surcharge move down too.
For all buyers and movers in the market to buy a property after 1st April 2025, it’s important to stay informed using the support of professional experts.