Spring SDLT Changes: higher SDLT bills for all homebuyers

The good thing about last week’s budget is that there were no announcements of major SDLT changes being immediately implemented – which meant no rush to exchange contracts within 24 hours.

However there was still a rush to complete matters on Monday in order to avoid key changes in SDLT which come into force on 1^st April which reduce the thresholds introduced in 2022. These were announced in the Autumn budget so buyers have had time to react before the 31^st March midnight deadline.

The changes will impact buyers at all price brackets but will significantly impact first time buyers in particular.

The nil-rate threshold has reverted from £250,000 to its previous level of £125,000. This means buyers will start paying SDLT on a greater portion of their purchase price. The rate of SDLT payable above £125,000 and £250,000 is 2% which equates to an additional £2,500.

Previously, first-time buyers benefitted from zero SDLT on properties up to £425,000 and received a discounted rate of 5% on the portion between £425,001 and £625,000.

The nil-rate threshold for first-time buyers has been reduced from £425,000 to £300,000. This means that many more first time buyers will have to pay SDLT on their purchases.

A 5% SDLT rate will be charged on properties priced between £300,001 and £500,000.

SDLT on the purchase of a residential property for £425,000 will now be £6,250. If that purchase had completed on Monday there would have been no SDLT to pay.

The First-Time Buyers’ Relief cap has also been reduced. The maximum purchase price eligible for FirstTime Buyers’ Relief has been reduced to £500,000 from £625,000. All property over £500,000 will no longer qualify for First-Time Buyers’ Relief, meaning standard SDLT rates will apply.

SDLT on the purchase of a residential property for £625,000 is now £21,250 – compared with £10,000 if completion had taken place on Monday.

HMRC do not regard those who have ever owned or part owned a residential property as first-time buyers. This includes not just those who have bought a property but those who inherited a property and those who are beneficiaries of a trust that owns property.

These changes will have a significant impact on first time buyers in London in particular where prices are much higher than those nationwide. This seems completely contrary to the Government’s announced intention to make housing more affordable for all and help younger people to get on the housing ladder. Instead it is quite the opposite.

There are no further announced changes to the SDLT regime on the immediate horizon. However the spectre of further SDLT increases – especially for non-UK residents – is ever present and one of a number of factors contributing to the current apprehension in the prime property market.

Our Residential Property team has considerable experience in this specialist area of law. For further information, please contact Rosie McCormick Paice.

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