A look at the recent changes to tax rates at the beginning of the month, the experience of working through them, increased regulation and responsibility within the conveyancing process, and an overview of the current residential SDLT rates that came into force on 1st April 2025.
Following the recent increase in Stamp Duty Land Tax and Entrepreneur’s Relief at the start of this month, we provide an update on our experience of working with and during the lead-up to the tax changes, and set out the current rates for SDLT.
Entrepreneur’s Relief increased from 10 – 14% at the start of this tax year and SDLT residential rates went up on midnight 31st March 2025.
Inevitably, the rate changes created a frantic atmosphere and push by all parties to get transactions completed before the deadlines. For ER, we experienced an uptick in owner founder companies sales ahead of the ER increase, but by and large, it was met with pragmatism by all parties, thus is the nature of such transactions.
The SDLT changes had a more noticeable effect resulting in every property purchaser seeking to complete prior to the rate increase, understandably.
The rate change came in on midnight of 31st March 2025. We found the abrupt deadline, rather than a transition period based on exchange dates, created a very busy period that perhaps could have been avoided by allowing for a transition cut off date for exchanges. The absolute deadline meant even for matters that had already exchanged contracts there was a race to complete to avoid the increase.
There was further complication by the October 2024 rate increase which was based on a transition period with exchanges before October falling into the old regime up to 31st March and after October falling into the increased rate brackets. Anything that went beyond 31st March fell into the new rates entirely.
We recall a much simpler time when the rate of SDLT payable depended on whether you were buying a residential property or a commercial property. In each category there were a list of clear reliefs that you could claim.
Today, the SDLT rules are complex and difficult to navigate. There are many factors to consider such as what type of buyer you are, where you are from, what time of property it is and what your purchase history has been. There are many categories of buyers and in our view there should be a call to completely overhaul the regime to simplify it. The rules are increasingly complex and there is a constant building upon existing rules.
Solicitors by and large are not regulated to advise on tax, but can give general advice and act in relation to tax matters ancillary to the underlying instruction (such as SDLT being ancillary to the conveyance transaction). The complexities add yet another layer to the conveyancing transaction. There has been a lot of increases in regulation of late, such as through the introduction of the Building Safety Act, risk assessments, and most recently the new banking CHAPS codes for specifying the purpose of CHAPS payments to banks, the responsibility for this all being passed onto the conveyancers.
It remains to be seen, but we believe it likely that this will result in longer process times from instruction to completion and higher fees that will end up being passed on to the client.
Interestingly, the UK is still an attractive place to invest for overseas buyers even with the rate increases that they are subject to. Whilst the rates in UK increased, they are still lower than a lot of countries in Europe.
We are grateful to our clients who worked with us on their matters through the lead up to the rate changes.
SDLT Rates from 1st April 2025
The rate changes that took place from 1st April brought in a reversion to the pre-2022 levels of SDLT, which saw a decrease in SDLT following COVID.
Turning now to the current rules relating to residential SDLT rates for reference purposes; it is taken from the HMRC manual and government website, but set out in a way that we trust is clear.
From 1st April 2025: Reversion to Pre-2022 Levels
The nil SDLT threshold and first-time buyers’ relief thresholds will return to their pre-September 2022 levels, therefore:
• The nil rate threshold for residential property purchases will revert to £125,000.
• For first-time buyers, the nil rate threshold will return to £300,000 for properties with a purchase price of up to £500,000. For properties exceeding £500,000, standard SDLT rates will apply.
Which SDLT Rates Apply to You:
For Individual Buyers who do not Have an Additional Property:
Rates from 1 April 2025
Property or lease premium or transfer value SDLT rate:
- Up to £125,000 Zero
- The next £125,000 (the portion from £125,001 to £250,000) 2%
- The next £675,000 (the portion from £250,001 to £925,000) 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) 10%
- The remaining amount (the portion above £1.5 million) 12%
Example
In April 2025 you buy a house for £295,000. The SDLT you owe will be calculated as follows:
• 0% on the first £125,000 = £0
• 2% on the second £125,000 = £2,500
• 5% on the final £45,000 = £2,250
• total SDLT = £4,750
FIRST HOME BUYER RELIEF
The Exemption If You Are Buying Your First Home:
You can claim a discount (relief) if the property you buy is your first home. You’re eligible if you and anyone else you’re buying with are first-time buyers.
Note that buying your first home is not the same meaning as not owning any other property. If you have owned other property before, this relief will not apply to you.
The discount you can claim depends on when you purchase the property.
Discount from 1 April 2025
You’ll pay:
• no SDLT up to £300,000
• 5% SDLT on the portion from £300,001 to £500,000
If the price is over £500,000, you cannot claim the relief. Follow the rules for people who’ve bought a home before.
Example:
You are a first-time buyer and purchase a property for £500,000. The SDLT you owe will be calculated as:
• 0% on the first £300,000 = £0
• 5% on the remaining £200,000 = £10,000
• total SDLT = £10,000
Higher Rates of SLDT
Things start to get a little more complex when you own an additional property.
Note this section relates to higher rates if you are an individual. Rates for companies and trusts is different again.
For Individuals:
You must pay the higher Stamp Duty Land Tax (SDLT) rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:
• it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world
• you have not sold or given away your previous main home
• no one else has a lease on it which has more than 21 years left to run
Importantly, the higher rates apply even if your spouse owns a separate property in their sole name, or if you own a substantial interest in a property as a beneficiary of a trust. If you have received a property through inheritance, you may not be caught by the higher rates provided you dispose of the inherited property in a certain time. If either of these things apply to you, you should take specific advice on this.
What about if I own my current home but am in the process of selling?
If you are selling your current home to move in, the higher rates still apply if you have not completed on your current home sale at the time of completion. However you are entitled to a refund of the higher rates if you sell to replace your main residence within 18 months of completion of the new property.
So what are the Additional Home Buyers Rates?
The higher rates from 1 April 2025
Property or lease premium or transfer value SDLT rate
- Up to £125,000 5%
- The next £125,000 (the portion from £125,001 to £250,000) 7%
- The next £675,000 (the portion from £250,001 to £925,000) 10%
- The next £575,000 (the portion from £925,001 to £1.5 million) 15%
- The remaining amount (the portion above £1.5 million) 17%
What About for Companies?
If you are a company you will automatically be caught by the higher rates.
Companies must pay the higher rates for any residential property they buy if the:
• property is £40,000 or more
• interest they buy is not subject to a lease which has more than 21 years left
If the property costs more than £500,000, the 17% higher threshold SDLT rate for corporate bodies may apply instead.
What about Non-UK Residents?
SDLT begins to mount up if you are an overseas buyer.
There is a 2% surcharge on residential properties in England and Northern Ireland bought by non-UK residents on or after 1 April 2021. The 2% surcharge applies on top of all other residential rates of SDLT including the higher rates for additional dwellings.
Exchanges before 30 October 2024
There is an exception, as there often is. If you exchanged contracts on or before 30 October 2024, the old rate of 3% will continue to apply.
The transitional provisions do not contain an “end date”, so, as it stands, so long as contracts were exchanged on or before 30 October 2024 and there is no variation / change of buyer, the rates of SDLT are applied as the rules were before the Budget changes. So, the 3% surcharge applies rather than 5%, even if there is a long delay before completion.
SDLTM09845A – SDLT – higher rates for additional dwellings – Transitional rules and the change of rate
The higher rates were increased for transactions with an effective date on or after 31 October 2024. Following the increase, the higher rates are 5 percentage points above the standard residential rates of SDLT.
Contracts entered into before 31 October 2024
Where a contract was entered into on or before 30 October 2024 but completes or is substantially performed after that date, the higher rates will apply to that transaction at the pre-31 October 2024 rate of 3 percentage points above the standard residential rates.
The exceptions to this are where, after 30 October 2024:
• there is any variation of the contract, or assignment of rights under the contract,
• the transaction is effected in consequence of the exercise of any option, right of pre-emption or similar right, or
• there is an assignment, sub-sale or other transaction relating to the whole or part of the subject-matter of the contract, as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance
Where the contract is entered into before 31 October 2024 and has an effective date on or after 1 April, the higher rates will apply at a rate 3 percentage points above the permanent residential rates that apply to transactions from 1 April 2025.
Contracts Substantially Performed before 31 October 2024
Where a contract which has been entered into and substantially performed later completes, that completion will normally be a notifiable transaction (see SDLTM08000 ) at the time of substantial performance. Therefore, where however a contract is substantially performed before 31 October 2024, but completes on or after that date, a land transaction return is not required at completion and no additional tax is chargeable if:
• additional tax would have been chargeable at completion only because of the increase in the higher rate from 3 to 5 percentage points above the temporary rates in force between 23 September 2022 and 31 March 2025, or
• additional tax would have been chargeable at completion only:
• due to the increase in the higher rate from 3 to 5 percentage points above the temporary rates in force between 23 September 2022 and 31 March 2025, and
• as a result of substantial performance taking place and being liable to SDLT in the period between 8 July 2020 to 30 September 2021 during which temporary rates of SDLT were chargeable.
This is not to be taken as legal advice or relied upon. If you require advice please contact us to enquire.