Stamp Duty Explained: What It Is, Current Rates, and Upcoming Changes

HM Revenue and Customs (HMRC) collects Stamp Duty Land Tax (SDLT), commonly called Stamp Duty, on property and land purchases in England and Northern Ireland. Various factors determine the amount buyers must pay, including their UK residency status, whether they are buying as an individual or a company, purchasing their first home, replacing a primary residence, or acquiring an additional property.

Current Stamp Duty Rate

In September 2022, the Government temporarily raised the thresholds at which Stamp Duty applies. This adjustment is set to expire on 31 March 2025, meaning higher rates will kick in for transactions completed after that date. Although this may seem a long way off, it’s important to consider that the typical property transaction can take 12 to 16 weeks to finalize. Some sales may even face unexpected delays that lengthen the process, and the time it takes to attract a buyer isn’t accounted for in this estimate.

Current Stamp Duty Rates (Effective Until 31 March 2025)

For a typical purchase of a freehold residential property by a UK-resident individual replacing their main home, the current Stamp Duty rates are as follows:

• 0% on the first £250,000
• 5% on the portion between £250,001 and £925,000
• 10% on the portion between £925,001 and £1.5 million
• 12% on any amount exceeding £1.5 million

At present, homebuyers purchasing properties valued under £250,000 are exempt from paying Stamp Duty. This exemption was introduced when the nil rate threshold was increased from £125,000 in Liz Truss’s mini-Budget of September 2022. Additionally, the threshold for first-time buyers was raised from £300,000 to £425,000. These enhanced thresholds are set to return to their previous levels in March 2025, which will have a significant impact on buyers.

Changes that would increase Stamp Duty from 31 March 2025

A number of significant changes will be introduced, though it remains unclear if further adjustments will be made prior to that date:

1. The nil rate threshold will be reduced from £250,000 to £125,000.
2. The first-time buyer nil rate threshold will be lowered from £425,000 to £300,000.
3. The maximum property value eligible for First-Time Buyers’ Relief will return to £500,000 from £625,000.

The updated rates for a standard purchase of a freehold residential property by a UK-resident individual replacing a primary residence will be:

• 0% on the first £125,000
• 2% on the portion between £125,001 and £250,000
• 5% on the portion between £250,001 and £925,000
• 10% on the portion between £925,001 and £1.5 million
• 12% on any amount exceeding £1.5 million

Expected Market Impact

A leading UK lender has predicted a spike in home sales early next year, as buyers rush to complete purchases before Stamp Duty rates increase. This expectation underscores the growing urgency among both buyers and sellers as the deadline nears.

Starting in March 2025, changes outlined in the latest Budget will result in many buyers facing Stamp Duty liabilities who would not have been required to pay it before. Nationwide estimates that one in five first-time buyers will be impacted, highlighting the substantial effect on this group.

Effect of Rate Changes on Common Property Types

Here’s how the upcoming changes will impact the Stamp Duty payable on average property values in Canterbury, according to Zoopla:

1. Detached Property (£561,605)
   • Before 31 March 2025: £15,580.25
   • From 31 March 2025: £18,080.25
2. Semi-Detached Property (£354,767)
   • Before 31 March 2025: £5,238.35
   • From 31 March 2025: £7,738.35
3. Terraced Property (£293,303)
   • Before 31 March 2025: £2,165.15
   • From 31 March 2025: £4,665.15

Buyers could save up to £2,500 by completing transactions before the rate changes take effect. This applies to residential buyers, second-home owners, and companies. It may be worth accelerating property plans to benefit from the current Stamp Duty rates.