In the ill-fated mini Budget, the then Chancellor increased the residential stamp duty land tax threshold from £125,000 to £250,000 with effect from 23 September 2023. The first time buyer threshold was also increased by £125,000 to £425,000; it now applies where a first-time buyer buys a home costing £625,000 or less.
Unlike many of the mini Budget announcements, the current Chancellor did not reverse this measure. However, he did impose a time-limit on the increase, announcing a sunset clause in the 2022 Autumn Statement. As a result, the higher thresholds will now only apply until March 2025, after which they will revert to their pre 23-September 2022 levels.
With falling house prices, buying may be attractive to those looking to purchase an investment or second home where the purchase can be funded without the need for a mortgage. There is no urgent rush as the higher thresholds are to remain until 31 March 2025. However, completing on or before 31 March 2025 will save residential purchasers SDLT of £2,500 (£125,000 @ 2%).
First-time buyers benefit from a higher threshold, as long as the property that they purchase does not cost more than the ceiling price for the first-time buyer threshold.
From 23 September 2023, the first-time buyer threshold is £425,000 and applies where the price paid is £625,000 or less. A first-time buyer will pay no SDLT on the first £300,000 and SDLT on the excess over £425,000 at the rate of 5%. If the price of the property is more than £625,000, the normal residential rate and thresholds apply.
The first-time buyer threshold is to revert to £300,000 from 1 April 2025 and once again will only apply where the price of the property is £500,000 or less. First-time buyers thinking of buying a property costing between £500,000 and £625,000 may wish to consider doing so on or before 31 March 2025. Delaying the purchase beyond 31 March 2025 could be expensive.
Tom is a first-first buyer looking to buy a flat in London. He has a budget of £600,000.
If he completes the purchase on a £600,000 on or before 31 March 2025, he will benefit from the first-time buyer threshold of £425,000. He will pay SDLT on the purchase of £8,750.
However, if he buys the flat on or after 1 April 2025, he will not benefit from the first-time buyer threshold as the price of £600,000 is more than the ceiling price applying from that date. Consequently, he will pay SDLT at the normal residential rates. This will cost him £20,000. Delaying the purchase increases the SDLT he must pay by £11,250.
Partner note: FA 2003, s. 55, Sch. 4ZA; Stamp Duty Land Tax (Reduction) Bill.