Property matters: The impact of stamp duty changes
Changes to Stamp Duty Land Tax (SDLT) which came into effect on March 31, 2025, are set to impact the property market, affecting affordability, demand and investment strategies.
What are the changes?
The changes bring to an end the SDLT cuts introduced by Kwasi Kwarteng in September 2022, and which Jeremy Hunt later announced would only remain in place until 31 March 2025. As a result of the changes:
- First time buyers will now pay SDLT on purchases above £300,000, when previously the figure was £450,000.
- For other buyers, SDLT must now be paid on purchases above £125,000, compared to the previous threshold of £250,000.
As an example, first time buyers purchasing a property for £425,000 will see Stamp Duty rise from £0 to £6,250. Other buyers purchasing a property for the same price would see Stamp Duty increase from £8,750 to £11,250.
Impact on affordability
Lowering the SDLT threshold means many buyers will face significant additional costs for purchasing a property. This could have several repercussions, including:
- Making some homes unaffordable for buyers
- Buyers making lower offers or asking sellers to lower the price to reduce the SDLT burden
- Delaying purchases for first time buyers
- Stamp Duty being added to mortgage loans, potentially affecting Loan To Value (LTV)
Influence on housing demand
Lowering the SDLT thresholds is expected to impact demand in two ways. Firstly, there is likely to be a growth in demand for homes priced below the threshold (£300,000 for first time buyers and £125,000 for others). This may result in prices for the most affordable homes increasing and lead to developers building more new homes aimed at first time buyers.
Conversely, the demand for properties above the new thresholds may fall, with the increased costs for mid-range buyers deterring people from moving home or driving them to consider less expensive properties. While this might not affect property valuations, some sellers may need to lower prices to attract offers, especially where SDLT is considered a major purchasing factor by buyers.
Effects on buy-to-let investors
Buy-to-let investors face several changes that may affect their investment strategies. An increase in demand for affordable homes will make it more costly to purchase a buy-to-let property, while those investing in higher-value properties will face increased Stamp Duty.
Additionally, the Renter’s Rights Bill, due to come into force in 2025, gives landlords additional responsibilities while implementing changes to tenancies and ending no-fault evictions. This could lead some landlords to abandon buy-to-let strategies, selling lower-value properties to take advantage of the rise in demand. As a result, rental prices could increase due to the fall in the supply of available properties.
Need Advice on Stamp Duty
If you are buying, selling or investing in property, it is essential to understand how SDLT affects your plans. At Wilkinson Woodward our legal experts and property professionals in our experienced conveyancing team are here to provide guidance and support all aspects of buying of conveyancing.