New Changes to Stamp Duty Land Tax and How They will Affect You

The government has introduced new changes to Stamp Duty Land Tax which has reduced the amount of Stamp Duty payable on property purchases in most cases. These changes came into effect on 23^rd of September 2022 but only apply to England and Northern Ireland as Scotland and Wales have their own tax provisions. Unlike the Stamp Duty holidays in 2020 and 2021, it seems these changes will be in place for the foreseeable future.

Changes to the Rates

Stamp Duty is calculated on the purchase price of the property with different percentages charged for each value band. Before the recent changes, the residential nil-rate threshold was £125,000, meaning the first £125,000 of the purchase price was calculated at 0%. This has been increased to £250,000.

This essentially means the previous 2% rate, which was applied on the amount between £125,001 to £250,000, has been eliminated. This will amount to a saving of up to £2,500 for the average buyer.

Buyers who are purchasing second homes, an additional buy-to-let property or corporate buyers, who are subject to the Stamp Duty Land Tax surcharge, will also benefit from the changes.  For these buyers, prior to changes, the first £125,000 was taxed at 3% and the next £125,001 to £250,000 was taxed at 5%. At the current rates the first £250,000 will be taxed at 3% with the remaining tax bands staying the same.

First Time Buyers

The Government are keen to help First Time Buyer’s enter the property market so in 2017, they introduced First Time Buyers Relief.  This provides, in certain circumstances, First Time Buyers with a higher nil-rate threshold. The changes mean that the nil-rate threshold for First Time Buyers has been increased from £300,000 to £425,000.

The threshold on which First Time Buyers can apply for First Time Buyers relief has also increased. Before the changes, the relief was only available for purchases up to £500,000. This has been increased to £625,000. This means if a First Time Buyer is purchasing a property for more than £625,000, they are not able claim the relief and they will pay Stamp Duty Land Tax at the normal rates. If a First Time Buyer is purchasing a property for less than £625,000, they can claim the relief. They would apply the nil-rate to the first £425,000 of the purchase price and only pay Stamp Duty at a rate of 5% on the difference between £425,000 and £625,000. This will provide significant savings for First Time Buyers.

Investment Zones and How SDLT is Affected

The government has also introduced Investment Zones around the UK. These zones are to encourage growth and investment in the areas of housing and infrastructure around the
UK by creating a more simplistic consent process for planning permissions. The goal is to reduce the requirements and government process surrounding development to help spur on development in these Investment Zones. There are 38 areas which have been identified as Investment Zones, one of which is Gloucestershire County Council.

The government has said that in these Investment Zones, there will be a full Stamp Duty relief available to land and buildings that are purchased for commercial or residential development, according to the new Investment Zone guidance published on the 24^th of September 2022.  Further guidance can be found in: https://www.gov.uk/government/publications/investment-zones-in-england/investment-zones-in-england

It is important to remember that Stamp Duty Land Tax is a complicated area.  For the majority of purchases the amount payable is simple to calculate but there are numerous factors which can influence the amount due.  If your circumstances are unusual, we always advise that you seek specialist advice from an accountant who specialises in Stamp Duty Land Tax.  We can assist you with obtaining this advice if required.

If you would like to find out more about our Residential Property Services, the specialist team in our Residential Property Department will be delighted to assist you. Please feel free to contact a member of our Residential Property Department on 01242 574244 or email Heidi Aitken at ha@hughes-paddison.co.uk and we will be happy to discuss your transaction.