Upcoming changes: do I need to worry about Stamp Duty?

When it comes to buying a property or land, what for many can already seem a daunting process becomes even more so when Stamp Duty is involved. However, understanding the figures can help to alleviate the worry.

Calculating Stamp Duty Land Tax on a property purchase can add to the stress and uncertainty of a property transaction. You may worry about incorrect calculations or being hit with a large tax bill. With new rates coming into force from the 1^st April 2025, it is important to be aware of the changes to see if you will be affected.  

Laura Noble, Associate in Coodes’ Residential Property team explores the current rules and upcoming deadlines.

The current rules around Stamp Duty

Stamp Duty is a tax on land or property bought over a certain price in England and Northern Ireland. There are different taxes to pay in Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax).

Stamp Duty is paid to HMRC under certain circumstances. This tax is incurred where you buy a freehold property or buy a new or existing leasehold property. It also applies when you buy a property through a shared ownership scheme; when you are transferred land or property in return for payment; you take on a mortgage; or buy a share of a property.

Stamp Duty is paid depending on the price that you pay for the property and is calculated in thresholds. If you buy a property for less than the threshold, there is no Stamp Duty to pay. The current thresholds are in place until the 31^st March 2025 and are calculated on a percentage of the price (consideration) paid.

When you buy a property, your conveyancer will prepare and submit a Stamp Duty return on your behalf. This has to be completed within fourteen days of the day the purchase is completed. If the return is unsubmitted or submitted late and any monies due are not paid on time, this can result in financial penalties.

How much will I currently pay?

The amount of Stamp Duty you pay is dependent on three things:

1. When you bought the property
2. How much you paid for it
3. Whether you are eligible for relief

The current rates change on 1^st April 2025 at which point Stamp Duty Land Tax will become applicable to properties over £125,000.

It’s a significant change as at present, there is no Stamp Duty to pay if you are buying your only residential property for less than £250,000 before the 31^st March 2025. No Stamp Duty is paid on non-residential properties that cost less than £150,000 either.

Currently, for a property that costs more than £250,000, the first £250,000 is tax free. Then, you will only have to pay tax on the remaining amount.

Where the property value is between £250,001 to £925,000 the Stamp Duty rate is 5%. For properties valued between £925,001 and £1.5 million, the tax rate is 10%. The final threshold is for properties valued over £1.5 million where owners have to pay a tax rate of 12%.

Example

For example, let’s say you buy a house in March 2025 that costs £295,000. This places you in the 5% bracket but remember you don’t need to pay tax on values up to £250,000.

This means the first £250,000 would be tax free, and you would pay 5% on the remaining £45,000.

Overall, you would currently need to pay £2,250 Stamp Duty on a property value of £295,000.

How much will I pay from 1 April 2025?

The Autumn Statement announced that the rates of Stamp Duty payable, as well as the available relief, would be changing from the 1^st April 2025. As of then, the 0% tax rate will apply to properties valued up to £125,000.

From £125,001 to £250,000 there will now be a Stamp Duty tax of 2%. The same 5% rate will still apply to values between £250,001 and £925,000. Similarly, the 10% rate will still apply to properties valued between £925,001 and £1.5 million. The 12% tax will also still apply to properties over £1.5 million.

Example

As an example, if you buy the same £295,000 house in April 2025, the Stamp Duty tax will be calculated at 0% on the first £125,000. This leaves a taxable amount of £170,000.

A 2% tax would need to be paid on the next £125,000 at an amount of £2,500. For the remaining £45,000, the 5% tax rate would apply, amounting to £2,250.

That means after April 1^st, a property value of £295,000 will incur a total Stamp Duty tax amount of £4,750 – so more than double than if you had bought a month earlier.

New leasehold sales and transfers

If you are purchasing a new residential leasehold property and a lease is granted to you before 1^st April 2025, then the Stamp Duty to be paid upon completion is based on the lease price. If the total rent amount payable over the course of the lease is more than the Stamp Duty threshold of £250,000, you will need to pay a 1% tax on the portion over that amount.

As of the 1^st April 2025, the threshold lowers to £125,000. These rules will not apply to existing leases.

First-time buyers, additional properties and non-UK residents

There are varying rates of Stamp Duty if you are a first-time buyer; if you already own a property and are buying additional property; or if you are not a UK resident.

First-time buyers can claim a relief or discount when buying a property, again depending  on when you buy the property.  

Until 31^st March 2025, first-time buyers do not pay any Stamp Duty on purchases up to £425,000. For properties over £425,000 but less than £625,000, a 5% tax is due on the portion between £425,001 and £625,000.

As of the 1^st April 2025, first-time buyers won’t pay any Stamp Duty on property up to £300,000. For properties over this, then 5% is due on the portion between £300,0001 and £500,000. And If the price is over £500,000 then you are not eligible for relief at all.

If you are purchasing a property that result in you owning more than one, you will usually have to pay 5% on top of the usual Stamp Duty rates. This additional levy is not payable if you are ‘replacing’ your main residence. For example, if you sell your current property and buy your new property on the same day.

If you have not sold your main residence on the day that you complete your new purchase, you will technically be the owner of two properties and pay the higher rates. However, you may be eligible to claim a refund of the additional monies if you sell your previous main residence within 36 months of completing your new purchase.

Non-UK residents – if you are not present within the UK for at least 183 days/6 months during the 12 months before you buy a property, you are not considered a UK resident for the purposes of Stamp Duty. Therefore, you may have to pay a 2% surcharge over and above the normal rates applicable on property in England or Northern Ireland.

How to manage the Stamp Duty changes

All of the above rules are only relevant to residential properties. Different rules apply to the purchase of non-residential or ‘mixed use’ property. Stamp Duty rules can be complex and difficult to decipher, particularly when rate and threshold changes are on the horizon.

The Government offer a free Stamp Duty Land Tax calculator to help you calculate tax on a property purchase.

For further guidance, you can also speak to your conveyancer who will be responsible for submitting the Stamp Duty Return and paying any monies due upon completion.

Coodes’ Residential Property team are members of both local and national conveyancing bodies. Our conveyancing service combines the latest technology and updates to the law. We recognise that the legal costs of a property transaction can cause worry, so we offer complete transparency about our conveyancing and other fees to provide estimates in advance. Reach out to Laura Noble for more advice on Stamp Duty Land Tax by emailing laura.noble@coodes.co.uk or calling 01872 246204. Alternatively, you can reach out to our Residential Property team by calling 0800 328 3282 or get an online quote