Stamp Duty Land Tax (SDLT) is the tax levied against almost every property purchase in England and Northern Ireland based on the price paid for a home. Today, someone moving home would pay no tax on the first £250,000. After that, they would pay 5% on the value between £250,000 and £925,000; 10% between £925,001 and £1.5m; then 12% on anything over that.
Rumours are, that the Chancellor is considering raising the stamp duty nil-rate threshold to £300,000 in the Autumn Budget (supposedly coming just before the general election). This has the potential to save the average household £2,500 when moving home. While this cut would be less generous than the SDLT holiday during Covid, the hope is that it encourages a few more moves by lowering transaction costs for buyers.
Who will be affected?So far this year, 55% of all buyers in England paid over £250,000 for their home, with 43% exceeding £300,000. Movers are most likely to gain from the cut given they tend to purchase more expensive homes. This has the potential to lift 49% of movers out of paying stamp duty, up from 36% under the current rules. The average mover who pays £307,310 for their home could see their stamp duty bill fall by £2,500 to a total of £366 if the change comes into effect.
Those buying a second home or investment property will still be required to pay the 3% surcharge on the whole value of the property. However, their bills could also fall by a maximum of £2,500 under the proposals. That said, most investors purchase buy-to-lets under the current £250k nil-rate band meaning they’re unlikely to benefit much from the change. However, those purchasing above the £250,000 threshold could save.
International buyers, who pay a further 2% on the additional residence category stand to benefit from such a change too. They tend to purchase more expensive homes and the proposals would reduce their bill from £17,500 to £15,000 on a £300,000 property.
The majority of first-time buyers, whose nil-rate band already extends to £425,000, won’t see any additional savings from such a cut. However, those who purchase a first home costing more than £625,000 could make savings under the proposals.
Which regions will feel the difference?
The impact of an SDLT cut will vary across different regions. In the South of England, where property prices are typically higher, more buyers stand to benefit from the proposed change. For example, the share of buyers in the South West who purchase a property above the nil-rate band and therefore face a stamp duty bill could fall from 67% to 49%, the biggest shift across England. In London, this figure could fall from 93% to 86%. While most movers and second home buyers in the capital would still be subject to a stamp duty bill, most would benefit from the £2,500 saving.
The change would mean that the average price of a home in every region in the Midlands and North England would be below the proposed stamp duty threshold, making most buyers stamp duty bill free. However, most buyers in London and the South of England would still be subject to a tax bill.
What impact could this have?
While the prospect of saving £2,500 might entice some to delay their move, the reality is that most buyers won’t see a meaningful change in their stamp duty bill. And given the housing market is beginning to pick up pace, price rises in the meantime could potentially erode any savings.
Longer-term, however, raising the nil-rate band would be a step in the right direction to help even out the cost of moving for buyers in the South of England with those in the North.
When considering potential stamp duty changes, it's crucial to understand how these could impact your financial planning, including whether you pay stamp duty when you sell a property.
