What does the change in stamp duty land tax from 1st April 2025 mean for a buyer?

If you buy land or property over a certain price in England or Northern Ireland, you must pay a fee to HMRC, namely stamp duty and land tax (SDLT). This tax is payable when you purchase a freehold, new or existing leasehold, or shared ownership scheme property, as well as when you purchase a property or land in exchange for payment, e.g. when you take out a mortgage.

SDLT is a significant part of the purchasing process when the property value meets certain thresholds, so it’s vital that homebuyers understand this charge and its implications. Read on to discover everything you need to know about SDLT: how much it is, how it’s changing and what this means for buyers.

Current SDLT thresholds and rates (before 1 April 2025)

Thresholds are where SDLT starts to apply. Buying a property or land priced under the threshold means there’s no fee to pay. Existing SDLT thresholds are as follows:

-       £250,000 for residential properties

-       £425,000 for first-time residential buyers where the value of the property is £625,000 or less.

-       £150,000 for non-residential land and properties

Rates for SDLT differ according to various factors, including whether you already own a property, if you’re a non-UK resident, when you bought the property or whether you’re eligible for relief or exemption. However, the standard rates for residential properties are as follows:

-       Up to £250,000 = 0% (unless first-time buyer)

-       On the next portion up to £925,000 = 5%

-       On the portion up to £1.5m = 10%

-       On the portion over £1.5m = 12%

You’re eligible for a discount (relief) if you or anyone you’re buying with are first-time buyers. Currently, you’ll pay no SDLT on purchases up to £425,000 and 5% on the portion up to £625,000.

New SDLT thresholds and rates (effective 1 April 2025)

The SDLT thresholds as of April are as follows:

-       £125,000 for residential properties

-       £300,000 for first-time residential buyers where the value of the property is £500,000 or less

-       £150,000 for non-residential land and properties

Again, the amount you pay will depend on various factors, but the standard new residential property rates are as follows:

-       Up to £125,000 = 0% (unless first-time buyer)

-       On the next portion up to £250,000 = 2%

-       On the portion up to £925,000 = 5%

-       On the portion up to £1.5m = 10%

-       On the portion over £1.5m = 12%

As of April, first-time buyers will pay no SDLT on purchases up to £300,000 and 5% on the portion up to £500,000.

It’s important to note that if you already own a property worth £40,000 or more and you buy another (or part of one), you’ll pay an additional amount on top of the rates stated.

There are several key differences between the SDLT system pre and post April 2025, the main being that the 0% rate threshold will decrease from properties priced at £250,000 to those priced at £125,000, with buyers now paying tax on properties costing over the lower amount.

For many purchasers, including first-time buyers, the changes to SDLT will result in higher stamp duty costs.

Impact on different types of buyer

First-time buyers

For those purchasing a property for the first time, there will be an increased tax burden on homes priced over £300,000. The maximum purchase price for which First-Time Buyers Relief (a reduced stamp duty rate) can be claimed is currently £625,000, but will return to the previous level of £500,000.

Existing homeowners

The lower nil-rate band means a higher tax liability for existing homeowners. Many homeowners who choose to move home will be drawn into the reduced nil-rate band bracket as of April.

Investors and buy-to-let purchasers

Currently, the SDLT for second homes includes a higher tax rate than for residential properties for primary use, and this is set to increase, with the rate on properties priced between £250,000 and £925,000 for second homes rising from 3% to 5% for example.

The upcoming higher rate revisions will see higher tax costs, particularly impacting mid-range property values, which have traditionally been a major focus for investors. As more investors target the buy-to-let market, these additional costs may negatively impact their investment returns.

Market implications

With 1 April fast approaching, many purchasers may act quickly to complete their property transaction and take advantage of the lower SDLT rates, causing a rush in the market.

Conversely, this market rush could become a market lull following the new SDLT rates taking effect, with diminished demand for mid- and high-value properties. Although the reduction of the nil-rate threshold will primarily affect first-time buyers, it could also influence the demand for affordable homes within this bracket, affecting the wider market. The shift in SDLT is also expected to disincentivise people from buying second homes.

While SDLT changes can influence buyer behaviour, other factors also affect the housing market, such as mortgage rates, inflation and housing supply. However, buyers faced with higher purchase costs will expect to see this reflected in the purchase price, which will likely act as a drag on house prices later in 2025.

Strategies for buyers

Act before April 2025: Given the substantial changes set to take effect, it’s wise to act promptly if you’re considering a property purchase, with the average buying process taking between 8 and 12 weeks.

Financial planning: While it’s always been necessary to factor in SDLT costs when considering a property purchase, the increase in rates makes budgeting even more important if you’re a potential buyer. Accounting for SDLT can mean the difference between affordability and unaffordability, and can give you peace of mind throughout the conveyancing process.

Seek expert advice: Instructing a solicitor early in the process is strongly recommended if you wish to complete a property transaction before the SDLT changes take effect. Property solicitors are experts on the complexities of the conveyancing process and are primed to advise you on your options, negotiate and liaise with sellers, and ensure paperwork is completed on time.

Whether you’re a first-time buyer, moving up the property ladder or considering an investment purchase, property solicitors can offer clear, professional advice tailored to your individual circumstances, navigating the SDLT changes and guiding you through your buying journey as smoothly as possible.