Recent changes to Stamp Duty Land Tax and Land Transaction Tax thresholds

24 October 2022

Stamp Duty Land Tax (SDLT) and Land Transaction Tax (LTT) are taxes levied by the English and Welsh governments when a property is transferred from one person to another. The amount of tax to be paid will depend on the property’s value. There are several thresholds that indicate how much tax is expected to be paid on the property’s value.

Recent changes to SDLT and LTT enable buyers to pay more for a property before becoming liable for tax payments. The implications are that buyers can afford pricier properties without paying as much stamp duty or land transaction tax. This is intended to positively impact the housing market, as residents in the UK will be able to afford more expensive properties.

This article will provide an overview of the recent changes to property tax thresholds and how this may affect buyers in the housing market. If you are in the process of purchasing a property and require the legal guidance of a solicitor, contact Redkite Solicitors. We can offer a wealth of knowledge surrounding SDLT, LTT, property conveyancing, and general legal matters.

How does this change affect property buyers?

The concept and practices of paying SDLT and LTT have not changed. Instead, the thresholds for payable taxes have been increased. This means buyers will only be required to pay tax on the portions of their property that exceed the new, higher thresholds.

This change came into effect on the 23rd of September 2022 and will affect residential property buyers completing their purchases following this date. It is important to note that the changes only apply to residential properties. Investors purchasing a second or buy-to-let property will continue to be subject to individual surcharges on additional properties.

Previous Stamp duty thresholds

Prior to the 23rd of September 2022, SDLT rates included the following:

Property price Previous SDLT rates
Up to £125,000 0%
Over £125,000 and up to £250,000 2%
Over £250,000 and up to £300,000 5%
Over £300,000 and up to £500,000 5%

Updated Stamp Duty thresholds

Following an update to SDLT thresholds on the 23rd of September 2022, rates are currently as follows:

Over £925,000 and up to £1.5 million10%

Property price Updated SDLT rates 
Up to £250,000 0%
Over £250,000 and up to £925,000 5%
The remaining amount (over £1.5 million) 12%

Previous Stamp duty thresholds

Prior to the 10th October 2022, Land transaction tax rates included the following:

Property Price Previous LTT rates 
Up to and including £180,000 0%
Over £180,000 up to £250,000 3.5%
Over £250,000 up to £400,000 5%
Over £400,000 up to £750,000 7.5%
Over £750,000 up to £1.5 million 10%
Over £1.5 million 12%

Updated Land Transaction Tax thresholds

Following an update to LTT thresholds on the 10th of October 2022, rates are currently as follows:

Property Price Updated LTT rates 
Up to and including £225,000 0%
Over £225,000 up to £400,000 6%
Over £400,000 up to £750,000 7.5%
Over £750,000 up to £1.5 million 10%
Over £1.5 million 12%

Does the change affect first-time buyers?

In England and Northern Ireland, first-time buyers are eligible for stamp duty relief. This is to make the property more accessible when purchasing the first property. The changes to the SDLT thresholds will benefit buyers of all types of properties. First-time buyers are another of the groups likely to benefit the most from the changes to SDLT thresholds. This is because the previous threshold that offered an exemption to stamp duty has also been increased.

The new SDLT thresholds will offer first-time buyers’ exemption from stamp duty on properties worth up to £300,000. This is an increase from the previous £125,000 threshold. Additionally, the maximum amount that first-time buyers can receive relief on has been extended to £625,000. Overall, this change has created opportunities for properties that would have been outside of a buyer’s budget to become more accessible

Does the change affect the purchase of second properties?

Property owners that have an existing property and purchase another are subject to higher rates of property tax. Those purchasing properties in England and Northern Ireland are subject to a 3% stamp duty surcharge on top of the current stamp duty rates. Those investing in Wales face a 4% surcharge in addition to the current land transaction tax rates.

Whilst the tax thresholds have made the initial tax payments more affordable, it is important to note that buyers with more than one property remain subject to the aforementioned surcharges.

What are the intentions of this policy change?

Following concerns surrounding the cost of living and increased property prices, investing in residential properties has become less desirable during 2022. This policy change intends to make homeownership more achievable and create a more desirable property market.

By reducing the overall cost of purchasing a property, it is expected that more buyers will be encouraged to return to the market. In turn, this will create a more active economy as buyers will invest in durable goods and services for their new homes.

Final Thoughts

Recent changes to the Stamp Duty Land Tax and Land Transaction Tax thresholds mean that residential property buyers in the UK can purchase higher-value properties without being liable for tax payments. This is a positive step in line with the current financial crisis causing many people to stop spending.

If you are considering purchasing a property and are interested in how the SDLT and LTT threshold changes could affect your property purchase, contact Redkite Solicitors today. Our conveyancing experts can inform you regarding any stage of the property purchase process, from placing an offer to completion.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.