Stamp Duty Land Tax update
Residential property taxes in the October 2024 Budget
Changes from 31 October 2024
Individuals who purchase additional residential properties, such as second homes or buy-to-let properties in England, generally pay Stamp Duty Land Tax (SDLT) at 3% above the standard SDLT rates. This rate is increased to 5% for transactions with an effective date (usually the date of completion) on or after 31 October 2024.
The changes also apply for companies and other non-natural persons purchasing residential property in England. In addition, there is also an increase in the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%, from the same date.
Changes from 31 March 2025
The time limited provisions of the Temporary Relief Act, again on residential property, remain in place for now, with thresholds falling back down to “normal” after 31 March 2025. The temporary threshold of £250,000 reverts to £125,000. First time buyers will be hit harder after 31 March 2025, with the upper price limit of £625,000 reverting to £500,000 and the maximum amount free of SDLT falling from £425,000 to £300,000.
Commercial SDLT issues
3 things to remember when dealing with commercial property and SDLT:-
- When entering into an overage agreement. Whilst SDLT may be payable at the time of the initial transfer of the land, you may also need to submit additional returns each and every time any overage becomes payable.
- Holding over leases. When a lease is taken that is inside the provisions of the Landlord and Tenant Act 1954, when the fixed contractual term comes to an end, if the tenant remains in occupation this is known as “holding over”. For each year that the tenant is holding over this has additional SDLT implications which may require the notification and payment of additional SDLT each year of holding over. This applies whether or not you are negotiating a new lease.
- Rent reviews which fall before the 5th anniversary of lease term. The initial SDLT calculation is done based on the highest rent for the first 5 years of the lease. If there is a rent review which falls within the first 5 years, the actual rental increase will not be known at the time the initial SDLT calculation is made. You may need to submit additional returns if the rent increases on rent review.
Please speak to your tax adviser or come and speak to Keelys Real Estate team.
Kate Palmer is a Partner in the Keelys Real Estate team: 01543 420021 | kpalmer@keelys.co.uk