Jonathan Woodroffe

Published 29 November 2022

Stamp Duty Update

For home buyers and property developers, it’s a worrying time. The squeeze on disposable income and increase in borrowing costs appear to have already resulted in new homebuyer enquiries falling to their lowest since 2008 and concerns that the property market is on the verge of a major downturn. And it’s not unusual in such times of turbulence in the property market for the government to use Stamp Duty Land Tax (Stamp Duty) incentives to help encourage buyers.

Stamp Duty is of course a tax imposed by the government on the purchase of land and properties with values over a certain threshold. So, after so many recent changes in the government’s approach, what is the current Stamp Duty regime?

What are the current rules relating to Stamp Duty?

Residential property

In the now infamous mini-budget in September, the then Chancellor announced that the threshold above which Stamp Duty would be payable on residential purchases would increase from £125,000 to £250,000 and for first-time buyers from £300,000 to £425,000, from 23rd September 2022.  The maximum amount an individual can pay for a property whilst remaining eligible for first-time buyers’ relief was increased to £625,000. These were meant to be permanent changes.

That means you pay 5% on anything over the £250,00 threshold and 10% on homes worth over £925,001 although Stamp Duty is due on the portion over the threshold and not the full amount. If it’s a second home, you also pay a 3% surcharge.

However, in the recent November budget, it was announced that these increases in the threshold rates will now be temporary and will revert to the original rates from 1st April 2025. Previously, rate band changes have been gradual to avoid too much disruption to the property market so it remains to be seen whether further changes will be announced in the months or years ahead. It is also not yet clear whether the increase in first-time buyers’ relief will remain in place permanently.

These rates of Stamp Duty only apply to purchases of land in England and Northern Ireland.

Non-residential property

For non-residential purchases, the rates remain at 2% for properties purchased for between £150,000 and £250,000 and 5 % for properties above £250,000. 

There has been an HMRC consultation about Stamp Duty and mixed-use properties and a government response is still awaited.

Whether the government has gone far enough and what impact these temporary changes will have on the property market, remains to be seen. If you would like advice about the implications of Stamp Duty, please get in touch.

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