The October Budget introduced surprise changes to Stamp Duty Land Tax (SDLT) that will affect individuals buying second homes, buy-to-let property investors and purchases by companies. Further changes to Stamp Duty thresholds planned for April 2025 will have a wider impact, hitting the pockets of first-time buyers hardest.
The Chancellor Rachel Reeves unexpectedly increased the SDLT surcharge on second home purchases from 3% to 5%. Properties with a value of up to £250,000 now incur a 5% surcharge, with properties valued between £250,001 and £925,000 landing a 10% SDLT rate.
That rate increases to 15% for properties between £925,001 and £1.5 million, and 17% for properties over £1.5m. These changes took immediate effect from 31 October.
The Labour Budget did not change SDLT rates on the purchase of an individual’s primary residence, recognising that, from April 2025, the higher tax-free £250,000 threshold introduced in September 2022 will fall back to £125,000.
SDLT exemptions
The Chancellor did, however, leave some valuable exemptions from SDLT alone.
One of these is in respect of property that is deemed uninhabitable, which remains exempt from the SDLT surcharge mentioned above, albeit with strict qualifying criteria. An uninhabitable property will typically lack basic amenities, such as running water or electricity, or have structural issues, such as a collapsed roof. A good but not foolproof test is whether the property still attracts council tax. If it doesn’t, it may well qualify for this relief.
HMRC, understandably, takes a keen interest in transactions where SDLT exemptions are claimed. It is essential to take professional advice before acting.
See our expert below for more information.
