Understanding Stamp Duty: Rules and Tips for Homeowners
Stamp Duty is one of the most significant costs to consider when buying a property. Whether you're considering a move or just staying informed, Here we will bring you up to speed on the latest rules, offer useful tips, and help you make the best financial decisions when buying property.
What Is Stamp Duty and Why Is It Important? Stamp Duty Land Tax (SDLT) is a tax that buyers pay on property or land purchases over a certain value in England and Northern Ireland. Scotland and Wales have separate taxes.
This tax applies to both freehold and leasehold properties and includes cash and mortgage purchases. For most property buyers, Stamp Duty is an unavoidable cost, so knowing the rates and potential exemptions can save you money and ensure you're financially prepared.
Stamp Duty Updates from the Autumn Budget In last Autumn's Budget, the Chancellor, Rachel Reeves, introduced some changes to Stamp Duty affecting additional property purchases and corporate investments.
Here’s what homeowners and investors should know:
- Higher Rate for Additional Properties: From 31 October 2024, the surcharge on second homes and buy-to-let properties increased from 3% to 5% on top of standard residential rates.
- New SDLT Bands (from 1 April 2025): The nil-rate threshold dropped back from £250,000 to £125,000—meaning buyers now pay more SDLT across the board.
- Higher Rate for Corporates & Trusts: Purchases of residential properties over £500,000 by non-natural persons (like companies or trusts) are now taxed at 17%, up from 15%.
Stamp Duty Rates Explained - Stamp Duty rates are tiered, meaning that different portions of the property’s price are taxed at different rates. Here’s a basic breakdown:
Property Price Bracket Standard Residential Buyer Additional Property/2nd Home/Buy to Let
Up to £125,000 0% 5%
£125,001 - £250,000 2% 7%
£250,001 - £925,000 5% 10%
£925,001 - £1.5 m 10% 15%
Over £1.5 m 12% 17%
3 Tips for Reducing Your Stamp Duty Bill
1. Consider First-Time Buyer Relief - If you’re purchasing your first property, confirm your eligibility for first-time buyer relief, which can reduce or eliminate your Stamp Duty liability. This could save you thousands on a property for sale.
2. Look Into ‘Mixed-Use’ Properties - Mixed-use properties, such as homes with commercial elements, attract lower tax rates as they’re treated as “non-residential” for Stamp Duty purposes. If you're considering unique property types speak with our team to find out if we have any properties that meet this category.
3. Consider Timing for Second Property Purchases - Buying an additional property incurs a surcharge, but timing can affect this. If you’re selling a property within 36 months of purchasing another, you may qualify for a rebate on the surcharge. You can apply here.
Common Stamp Duty Myths
You Can Avoid Stamp Duty by "Gifting" the Property - Even if a property is "gifted," Stamp Duty may still apply unless it is gifted to a company. It’s essential to understand the rules to avoid any unexpected costs.
Stamp Duty Only Applies to High-Value Properties - Even though properties under £125,000 are exempt for standard buyers, Stamp Duty can still apply to additional properties or purchases over this threshold.
Calculating Stamp Duty for Your Property - Stamp Duty can be confusing due to its tiered structure. Contact our Mortgage Department who will be happy to guide you through all aspects of stamp-duty.
What Next? Whether you're a first-time buyer or an experienced property owner, it’s essential to stay informed about Stamp Duty changes.
At Perry Bishop, we are committed to guiding you through each step of the buying process and helping you make informed decisions.
Ready to make your next move? Planning to buy or sell property, let us help you take the next step. Give us a call today.