The Autumn Budget of 2024 brought a surprise Stamp Duty Land Tax change. But the biggest and most likely unwelcome surprise is what wasn’t mentioned. Chancellor Rachel Reeves delivered her Autumn Budget to the nation as the first Labour Budget in 14 years on 30 October 2024.
Jonathon Waterhouse, Director and Head of Conveyancing at Barker Booth & Eastwood, shares everything that you need to know if you are a property owner, landlord or prospective buyer. As Jonathon delves into the details, it’s essential to understand the implications these changes could have on your property-related ventures and seek the appropriate advice.
Stamp Duty Land Tax on Second Properties
One of the most notable (and unexpected) changes in the 2024 Budget is the revision of Stamp Duty Land Tax (SDLT) rates for additional residential properties.
The government has decided to increase the rates to address housing market dynamics and generate additional revenue. The stamp duty surcharge for those buying second homes has increased from 3% to 5% with immediate effect.
Landlords or property developers and those buying residential properties through a limited company will now pay a starting rate of 5% Stamp Duty Land Tax.
Despite being speculated to change, Capital Gains Tax rates on residential property disposals remains unchanged. A welcome surprise for most owners of additional residential property.
Upcoming Changes to Stamp Duty Land Tax – 2025
Perhaps the most unwelcome surprise, is the silence on current Stamp Duty exemptions for house movers and first-time buyers.
The previous Government adjusted Stamp Duty thresholds back in the summer of 2020 to stimulate the housing market as the country battled the challenge of the covid-19 pandemic. SDLT was lowered significantly, and in most cases, first-time-buyers had zero Stamp Duty to pay at all. These reductions and exemptions are due to come to an end in March 2025.
The Autumn Budget made no reference to extending the temporary Stamp Duty Land Tax cut; therefore, buyers must familiarise themselves with the rates returning to pre-pandemic percentages. The change will see a minimum additional tax of £2500 for any purchase above £250,000. The rates will revert to the below:
HOUSE MOVERS WHO ARE NOT FIRST TIME BUYERS
- Properties up to £125,000 – Zero
- Properties from £125,001 to £250,000 – 2% (currently Zero)
- Properties from £250,001 to £925,000 – 5%
- Properties from £925,001 to £1.5m – 10%
- Properties over £1.5m – 12%
First Time Buyers will see the nil rate reduce by £125,000.00. The rates will return to:
- Properties up to £300,000 – Zero (currently nil to £425,000)
- Properties from £250,001 to £625,000 – 5%
Purchases over £625,000.00 cannot claim relief and will be subject to the rules and rates for people who have owned a home before.
Implications for First-Time-Buyers and Home Movers
We may now see a rush to buy properties before rates rise from 1 April 2025, which could distort the market, increase demand and fluctuate property prices.
First-time-buyers will be hit the hardest as they see their tax-free band significantly reduced, which may impact their timescales, affordability to move or impact their decision on the type and size of property they buy.
Those selling their properties may wish to bring their plans forward. Owners with properties valued around the returning SDLT thresholds of £125,000 or £250,000, in particular could be affected.
Those looking to upgrade or downsize will need to factor evaluate the new SDLT rates.
Considerations for Buy-to-Let Landlords
The 2024 Budget’s changes to Stamp Duty Land Tax will notably affect property investors and buy-to-let landlords. With increased SDLT rates for additional properties, the financial landscape becomes more challenging. Investors will need to evaluate the cost-effectiveness of acquiring new properties, as the heightened SDLT could impact profit margins. This scenario may lead landlords to reconsider their investment timelines, opting for longer-term holdings rather than quick sales to maximise returns.
Buy-to-let landlords, in particular, may face increased pressures. The elevated transaction costs could compel landlords to raise rents to offset the higher SDLT, influencing rental market dynamics and tenant affordability. Moreover, the added expenses might deter some from expanding their portfolios, prompting a more cautious approach to property investments.
Strategic planning will be paramount. Investors must weigh potential rental income against the increased upfront costs, ensuring that any new acquisitions align with long-term financial goals.
Expert Conveyancing Services
Whether you are keen to get your home purchase or sale over the line before 1 April 2025 or want to assess your property portfolio and long-term investment plans. Our friendly and knowledgeable conveyancing solicitors are on hand to assist you.
Don’t delay your instruction. As knowledge of the rate reductions becomes known, we anticipate an influx of instructions.
Contact us on 01253 362500 or email info@bbelaw.co.uk and we’ll be happy to speak to you about your next property transaction.
