Despite the shortage in rental accommodation, investment in residential property is out of favour. In her Autumn Budget, the Chancellor increased the cost of buying a second or subsequent residential property by raising the stamp duty land tax (SDLT) supplement by two percentage points, from 3% to 5%, with effect from 31 October 2024.
SDLT is payable on the chargeable consideration on land and property in England and Northern Ireland. Land and Buildings Transaction Tax is payable on land and property purchases in Scotland, whereas land and property purchases in Wales are liable to Land Transaction Tax.
As far as SDLT is concerned, the amount that is payable depends on the type of land or property – residential or non-residential or mixed.
Residential property rates
SDLT is payable on each slice of consideration where the cost exceeds the SDLT residential threshold. This is currently £250,000 but will revert to £125,000 from 1 April 2025. From that date, a separate rate will apply to the band of consideration from £125,000 to £250,000.
The threshold for first-time buyers is higher. The threshold, which only applies where the purchase price is £625,000 or less, is currently £425,000. The threshold will revert to £300,000 from 1 April 2025, and the price cap will revert to £500,000.
For second and subsequent residential properties, SDLT is charged where the consideration is £40,000 or more at the residential rates plus a supplement. The supplement was 3% prior to 31 October 2024. It was increased to 5% from 31 October 2024. The reduction in the residential threshold from 1 April 2025 will increase the rate purchasers of second and subsequent residential properties pay on the slice from £125,000 to £250,000.
The residential rates applying now and from 1 April 2025 are shown in the tables below.
31 October 2024 to 31 March 2025
Consideration SDLT rate Second and subsequent residential properties (consideration £40,000 or more)
Up to £250,000 0% 5%
Next £675,000 (portion
from £250,001 to
£925,000) 5% 10%
Next £575,000 (portion
from £925,001 to £1.5
million) 10% 15%
Remaining amount (over £1.5 million) 12% 17%
First-time buyers buying a property costing no more than £625,000 pay nothing on the first £425,000 and 5% on the remainder.
From 1 April 2025
Consideration SDLT rate Second and subsequent residential properties (consideration £40,000 or more)
Up to £125,000 0% 5%
Nest £125,000 (portion
from £125,001 to
£250,000) 2% 7%
Next £675,000 (portion
from £250,001 to
£925,000) 5% 10%
Next £575,000 (portion
from £925,001 to £1.5
million) 10% 15%
Remaining amount (over
£1.5 million) 12% 17%
First-time buyers buying a property costing no more than £500,000 pay nothing on the first £300,000 and 5% on the remainder.
Impact
An individual buying an investment property for £700,000 would have paid SDLT of £43,500 if the purchase completed before 31 October 2024.
If the purchase completes between 31 October 2024 and 31 March 2025, the SDLT hit is £57,500 – an additional £14,000 (2% of £700,000).
If the purchase does not complete until after 1 April 2025, the SDLT hit is £60,000 as a further 2% is payable on the band from £125,000 to £250,000.
Non-residential property
For non-residential properties, no SDLT is payable on the first £150,000. Thereafter it is payable at 2% on the next £100,000 and at 5% on the balance. There is no supplement where the individual has multiple non-residential properties. The non-residential rates also apply to mixed property, for example, a shop with a flat above.
