Stamp duty, or as it is properly known Stamp Duty Land Tax (SDLT) is a tax that the purchaser of a property pays to the Government when buying a property. The amount paid is graded according to the value of the property and for the most expensive properties on the market can run into tens of thousands of pounds. Even at the lower end of the price scale, these additional costs of buying a property can make it prohibitive. In the recent mini-budget the Chancellor of the Exchequer announced a series of tax cuts to help boost the economy. One of the cuts that was announced was a cut in stamp duty. In this article we will take a look at what this means for those buying properties.
Understanding previous SDLT rates and arrangements
Prior to the changes made in this mini-budget SDLT was payable as follows:
| Price | SDLT Percentage only home | SDLT percentage extra properties |
| Up to £125,000 | 0% | 3% |
| £125,001 to £250,000 | 2% | 5% |
| £250,001 to £925,000 | 5% | 8% |
| £925,001 to £1.5 million | 10% | 13% |
| Over £1.5 million | 12% | 15% |
There were special arrangements for first time buyers where there was no SDLT payable on the first £300,000 and then only 5% on the portion between £300,001 and £500,000. If a first time buyer bought a property worth more than £500,000 then standard SDLT rates as above applied.
Calculation examples: SDLT before the changes
To put this in context, if someone were to buy a property worth £550,000 as their only home then they would pay 0% for the first £125,000, then 2% for the next £125,000 up to £250,000 (£2,500) and then 5% on the final £300,000 (£15,000) so the total amount of SDLT would be £17,500. For someone buying this as a second home this would be 3% on the first £125,000 (£3,750) then 5% the next £125,000 up to £250,000 (£6,250) and then 8% on the final £300,000 (£24,000) making a total payable of £34,000.
This has all now changed and for any property being purchased after the 23rd of September 2022, different SDLT rates will apply. These new rates are detailed below:
| Price | SDLT Percentage only home | SDLT percentage extra properties |
| Up to £250,000 | 0% | 3% |
| £250,001 – £925,000 | 5% | 8% |
| £925,001 to £1.5 million | 10% | 13% |
| Over £1.5 million | 12% | 15% |
The new rates for first time buyers are: no SDLT payable on the first £425,000 and then only 5% on the portion between £425,001 and £625,000. If a first time buyer buys a property worth more than £625,000 then standard SDLT rates as above applied.
Using the example above for a property being purchased for £550,000 the SDLT liability will now be: As their only home then they would pay 0% for the first £250,000, then 5% for the next £300,000 up to £550,000 (£15,000) so the total amount of SDLT would be £15,000 which is a saving of £2,500. For someone buying this as a second home this would be 3% on the first £250,000 (£7,500) then 8% on the next £300,000 up to £550,000 (£24,000) making a total payable of £31,500 a saving also of £2,500.
It is. However, the first-time buyers who are the biggest winners. If we look at the example above, under the old rules, they would have had to pay standard rates of SDLT which would have been £17,500. Under the new rules, they pay nothing for the first £425,000 and then 5% for the portion between £425,001 and £550,000 giving a total payable of £6,250 which is a saving of £11,250.
These tax cuts will benefit anyone purchasing a property, from those moving on to new properties, to landlord purchasing properties to add to their property portfolio and to first time buyers.
