2024 Stamp Duty Land Tax Changes: Key Updates Explained

The Chancellor of the Exchequer, Rachel Reeves, announced a significant increase in Stamp Duty Land Tax (SDLT) on the purchase of additional residential property by individuals and residential properties by companies during the Autumn Budget speech on Wednesday, 30 October 2024, where:

• Higher SDLT rates for additional residential properties increased from 3% to 5% on the initial £250,000 threshold, adding 2% in each rate band.
• Single rate of SDLT for companies and other non-natural persons purchasing residential properties over £500,000 increased from 15% to 17%.
• SDLT rates for companies purchasing residential properties below £500,000 increased from 3% to 5% on the initial £250,000 threshold, adding 2% in each rate band.

When Do They Take Effect?

This change applies to transactions with an effective date on or after October 31, 2024.

Transitional rules may apply, where contracts are exchanged prior to 31 October 2024 but complete or are substantially performed on or after that date.

Overview of SDLT

Stamp Duty Land Tax (SDLT) is a type of tax on land transaction generally payable on the purchase or transfer of property or land in England and Northern Ireland. It becomes payable when the chargeable considerations exceed a certain threshold. The land transactions include acquiring an estate, interest, right, or power over land.

SDLT applies when you buy a freehold property, a new or existing leasehold, acquire a property through a shared ownership scheme, or are given land or property in exchange for payment, such as taking on a mortgage or buying a share in a house.

SDLT is levied only when these transactions exceed certain thresholds or meet specific legislative criteria. The current thresholds are £250,000 for residential properties, £425,000 for first-time buyers purchasing residential property worth up to £625,000, and £150,000 for non-residential land and properties. Transactions below these thresholds are exempt from SDLT.

However, the tax is different in Scotland and Wales, known as the Land and Buildings Transaction Tax (LBTT) in Scotland and the Land Transaction Tax (LTT) in Wales, discussed below in this article.

Who is Liable for Paying SDLT?

The purchaser, who acquires the interest, is responsible for submitting the return and paying the tax while the vendor disposes of the interest.

Increased Rates of SDLT from 31 October 2024

You must pay higher SDLT rates when buying a residential property for £40,000 or more if it will not be your only residential property worth £40,000 or more worldwide, you have not sold or given away your previous main home, and no one else has a lease on it with more than 21 years left.

This applies even if you intend to live in the property. You must also consider properties owned on behalf of children under 18, properties where you are a trust beneficiary, and your current home if still owned at the end of the purchase day. If any of these conditions apply, you will need to pay the higher rates.

If buying a new residential property means you will own more than one, an additional 3% Stamp Duty Land Tax (SDLT) rate applies to purchases completed between 1 April 2016 and 30 October 2024.

This rate increases to 5% for purchases completed on or after 31 October 2024. However, if contracts were exchanged before 31 October 2024 but completed on or after that date, the 3% rate still applies. Additionally, higher rates do not apply to contracts exchanged on or before 25 November 2015 but completed on or after 1 April 2016.

These increased thresholds are set to expire in March 2025, where they are anticipated to return to their previous levels.

The revised higher SDLT rates for transactions with an effective date between 31 October 2024 and 31 March 2025, are as follows:

Legislation will be introduced in Finance Bill 2024-25 to amend Table A in paragraph 1(2) of Schedule 4ZA of the Finance Act 2003, amending the higher rate of SDLT payable.

Companies are required to pay higher rates of SDLT (a 5% surcharge on top of the standard SDLT rates) on any residential property they purchase if the:

• property is valued at £40,000 or more
• the interest acquired is not subject to a lease with more than 21 years remaining

However, if the property’s value exceeds £500,000, a 17% higher rate may apply, as discussed below in this article.

From 20 March 2014 to 30 October 2024, SDLT was charged at 15% on interests in residential dwellings costing more than £500,000 purchased by certain non-natural persons. This rate for corporate bodies is increased to 17% on 31 October 2024.

SDLT is now set at 17% for residential properties over £500,000 purchased by specific corporate entities, such as companies, partnerships with corporate partners, and collective investment schemes. However, this rate does not apply to properties bought by a company acting as a trustee of a settlement.

Are there any exemptions available?

Exemption from the 17% rate may be available if the property is used in a property rental business, bought by a property developer or trader, used in a trade involving making the property available to the public, bought by a financial institution in the course of lending, occupied by employees of the purchaser, a farmhouse, or bought by a qualifying housing co-operative. Different conditions apply for each relief.

When is the Deadline for Paying SDLT?

Within 14 days of the effective date of the transaction by filing an SDLT return to HMRC even if no tax is owed.

Who is Responsible for Sending a Return?

The purchaser is responsible for filing a land transaction return (SDLT1 form or its electronic equivalent) and paying any SDLT owed. The payment deadline is the same as the return. You can pay any SDLT as soon as you have submitted the return.

You will be liable to pay the penalty if you miss the filing date.

If you are a solicitor or legal conveyancer, you must send an online return to HMRC. However, if a solicitor or legal conveyancer does not represent you, you must use the SDLT1 paper return.

Which Tax Applies to Property Purchases in Scotland?

From 1 April 2015, SDLT no longer applies to land transactions in Scotland.

If you’re buying a home in Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT) on the property costing more than £145,000.

In case of second home, might have to pay an additional dwelling supplement (ADS) of 6% on top of LBTT standard rates if the value of the property is more than £40,000.

LBTT current residential rates are as follows:

Which Tax Applies to Property Purchases in Wales?

In April 2018, Wales replaced SDLT with Land Transaction Tax (LTT), administered by the Welsh Revenue Authority (WRA). As of 10 October 2022, the minimum LTT threshold is £225,000. You do not have to pay LTT if you buy a property for less than £225,000 and do not own any other property or if you buy a new lease for less than 7 years.

Different rates apply to the portion of the property price within each band when buying a residential property (freehold or leasehold).

Higher rates of 4% apply starting from the portion up to and including £180,000 on top of standard residential rates when purchasing a residential property worth £40,000 or more and already owning one or more other properties, including properties held on behalf of children under 18 (where parents are treated as owners) and properties where you have an interest as a beneficiary of a trust.

For companies, higher rates apply if the property is £40,000 or more and does not have a lease with more than 21 years left. Transfers of equity may also be subject to higher rates.

LTT current rates for residential property are as follows:

You must submit a return and pay the LBTT and LTT due, within 30 days from the day after the effective date of the transaction.

Conclusion

Recent changes to SDLT rates have made purchasing additional residential properties more expensive. The SDLT rate for second homes and rental properties has increased, as has the rate for companies and other non-natural persons purchasing residential properties. These changes also target high-value transactions by companies and non-natural purchasers.

These adjustments will affect individuals, companies, and professionals involved in property transactions, including conveyancers, potentially slowing the market due to higher costs. However, it is important to note that these rates are subject to certain exemptions. It is better for purchasers to consult UKPA before making any SDLT payments to understand their obligations and any potential exemptions.