The British government announced a cut to the SDLT rates on the 23rd of September 2022 and these cuts will stay intact until the 31st of March 2025, this cut was put in place in the hopes of supporting the housing market and helping people across the country move residences in a fair and secure manner, especially with what the country has been through with the pandemic, this cut is here to make people’s life easier and more affordable for the foreseeable future.
Stamp Duty Changes in England and Northern Ireland
As stated above, stamp duty land tax in England and Northern Ireland is changing, and certain thresholds have been increased and reduced in order to help the buyer with purchasing their residence, SDLT will remain in this cutting period until 31st March 2025.
Stamp Duty Changes in Wales
Land Transaction Tax is the equivalent of SDLT but in Wales, if you purchase property or land above a certain threshold then you will be required to pay LTT tax, just like SDLT.
If you don’t own another property in Wales, then the pricing where the tax starts to apply is £225,000 for residential properties, for non-residential land and properties the starting threshold is £225,000.
In terms of refund of stamp duty land tax on LTT in Wales, there are certain differences between LTT and SDLT such as there being no first-time buyers refund of stamp duty land tax in Wales, however, there are multiple other reliefs.
Multiple dwellings refund of stamp duty land tax still applies in Wales, this relief applies when you purchase a property in Wales which has more than one dwelling, in order for a property to qualify as a dwelling, it must include a kitchen area, bathroom area, sleeping area, and an independent living area.
Also, just like in England, if a charity purchases a property they will receive a relief on the amount of LTT they pay.
Stamp Duty in Scotland
Otherwise known as Land and Buildings Transaction Tax in Scotland, this system is similar to the SDLT system we have in England.
In Scotland, buyers are required to pay tax on the amount between bands instead of the property price as a whole.
The current LBTT rates are:
- Less than £145,000 – 0%
- £145,000 – £250,000 – 2%
- £250,000 – £325,000 – 5%
- £325,000 – £750,000 – 10%
- Amount over £750,000 – 12%
First-time buyer’s relief was introduced to LBTT in 2018, any property less than £175,000 will include no LBTT to be paid.
New Stamp Duty Rates until 31st March 2025
The new rates on stamp duty land tax are:
- Up to £250,000 = 0%
- £250,001 – £925,000 = 5%
- £925,001 – £1.5m = 10%
- £1.5m + = 12%
How much money will you save?
Ultimately, the more expensive the property that you are looking to purchase, the more money you will save overall.
For example, because the first-time buyers’ refund of stamp duty land tax threshold has been raised to £500,000 if you were to purchase a property for £400,000 then you would pay no SDLT on that property.
Here is another example of how the SDLT changes can affect what you save, before the SDLT changes, if you purchased a house for £1 million then you would be charged 0% on the first £125,000 then 2% on the next £125,000 which would have then equalled out at £2,500, then 5% on the next £675,000 which is £33,750, and then finally 10% on the final £75,000 which is £7,500.
The total SDLT paid is £43,750.
If we were to repeat this process but with the updated rules and changes to SDLT it would go as follows.
Again, for example, if you were to purchase a residence for £1 million, you would pay 0% on the first £250,000, then 5% on the next £675,000 which would be £33,750, then finally 10% on the final £75,000 which would be £7,500.
This then means you would spend £41,250 on SDLT, which then means overall, because of the recent changes, you would save £2,500.
Starting Rate Changes
One important change the government is making to SDLT is the starting rate in which you pay SDLT, Previous to this plan the starting rate was £125,000 whereas it has now doubled to £250,000. Due to this rule, it will mean that thousands more people can confidently move homes and boost household consumption, due to all these people moving homes it will massively affect the thousands of jobs that exist depending on the housing market.
First-Time Buyer Threshold Increases
Another change that will massively help buyers gain access to the property market is increasing the level where first-time buyers start paying stamp duty on their property, from £300,000 to £425,000.
This tax cut will have a positive impact on the housing market, whilst also boosting jobs and generating economic confidence.
Increased Purchase Amount for SDLT Relief
Increase in the maximum amount someone can purchase a residence for and still be eligible for the relief, from £500,000 to £625,000.
This will then massively help the sales of many homes, whilst also helping people climb the property ladder.
If the housing price is less than £625,000 then you could be eligible for shared ownership if you were to be moving in with a roommate, also joint mortgage could also be available and as long as both of you qualify as first-time buyers then you could claim a refund of stamp duty land tax.
Pay the right amount of SDLT
With the new SDLT rates in place, it’s important that you pay the right rate on property purchases. As experts in Stamp Duty Land Tax Refunds, exemptions and tax reliefs, CapEx can support you to ensure you pay the right rate based on the value of the property you have purchased. If you think you’ve overpaid and want to claim an SDLT refund on residential properties or investment properties, we can support your claim.
Get in touch with our tax advisors today to get your claim started today.