Budget 2024: Changes To Stamp Duty Land Tax
Chancellor Rachel Reeves delivered her first budget on Wednesday 30 October, setting out the government’s tax and spending plans. This includes changes to Stamp Duty Land Tax.
Whilst the expected increase to CGT for residential property didn’t materialise at today’s budget, investors were the nevertheless hit by a surprise hike in the second property Stamp Duty Land Tax (SDLT) surcharge, seeing a rise of 2%, from the existing surcharge of 3%, to 5%.
The government suggest this increase is expected to result in 130,000 additional transactions, made up of first-time buyers and those buying their main residence over the next five years, in the anticipation that the hike will see less competition from landlords or those looking to purchase second properties.
The hike comes into force from Thursday 31 October. Investors and those purchasing second properties will be rushing to exchange contracts this afternoon, after which, the surcharge will apply to all second property purchases in England and Wales. Thankfully, those who have already exchanged contracts, or who manage to exchange contracts by close of business today, will remain liable for the current surcharge of 3%.
The increase in this surcharge, originally introduced in April 2016, will no doubt have a significant impact on those purchasing a second property. In addition, the rate payable by corporate bodies for purchases of property with a value of over £500,000 will increase from 15% to 17%. Such increases may well result in deals collapsing or having to go on hold whilst the impact of this additional charge is considered by those affected.
On 23 September 2022, the threshold for SDLT for residential property was increased from £125,000 to £250,000 for all purchasers. At this time, the first-time buyer threshold was also increased from £300,000 to £425,000. Both these increases were imposed as a temporary measure and are due to come to an end in March 2025.
Whilst this may see a short-term boost to the residential property market in the typically quieter winter months in the run up to March 2025, this extra expense for first time buyers and buyers in general will no doubt create another hurdle for those looking to move or get on the property ladder.
CGT rates for residential property, linked to the owner’s income tax banding and subject to personal allowances, however remain the same. The current rates being 18% for standard-rate tax-payers and 24% for higher-rate taxpayers.
The rate for higher-rate tax payers was reduced from 28% to 24% earlier this year under the previous government, initially for one year only, and this rate appears to be kept in place. The widely anticipated changes today are that other forms of gains are brought into line with residential property, ending the period when gains on residential property were subject to a surcharge.
