Stamp Duty Land Tax – Higher Rates For Additional Dwellings

Stamp Duty Land Tax (SDLT) rates for additional residential properties have been increased from three percentage points above the standard residential rates of SDLT to five percentage points above the standard residential rates of SDLT for any transactions which take place on or after 31 October 2024.

Below is a summary of the rates which applied from 23 September 2022 – 30 October 2024 to additional properties versus the new rates with effect from 31 October 2024.

Increased SDLT rate from 31 October 2024	SDLT rate up to 30 October 2024	Increased SDLT rate from 31 October 2024
Up to £250,000	3%	5%
The next £675,000	8%	10%
The next £575,000	13%	15%
The remaining amount	15%	17%

Then, with effect from 1 April 2025, the SDLT rates which will apply to additional properties (i.e. at the higher rate of SDLT) will be as follows:

Additional property value (applied in tiers)	SDLT rate at the higher rate
Up to £125,000	5%
The next £125,000	7%
The next £675,000	10%
The next £575,000	15%
The remaining amount	17%

If a contract was agreed and entered into on or before 30 October 2024 but completion then occurs after this date, the previous higher rates which were in force up to the 30 October (above) will apply to the transaction. However, certain exceptions apply if after 30 October 2024:

• the contract is varied or any rights under the contract are assigned,
• the purchase proceeds as a result of the exercise of any option, right of pre-emption or similar right, or
• an assignment, sub-sale or other transaction occurs, which either fully or partially relates to the asset subject to the contract and, following this, a person other than the original buyer gains entitlement to a conveyance.

Essentially, if the contract was agreed before 31 October 2024, and becomes effective between 31 October 2024 and 31 March 2025, the higher rates of SDLT will be applied, but at the three percentage points above the temporary residential SDLT rates which are in place between 23 September 2022 and 31 March 2025, rather than at five percentage points above the residential SDLT rates which will apply from 31 October 2024.

If a contract was agreed prior to 31 October 2024 and takes effect on or after 1 April 2025, the higher rates of SDLT will be applied at the rate of three percentage points above the permanent residential SDLT rates which will apply to transactions with effect from 1 April 2025.

Where a contract that has been agreed by all parties and is liable to SDLT as a result of the transaction being substantially performed, is then later completed by a conveyance, both the contract and the completed transaction are deemed “notifiable transactions.” Please see SDLTM08000. Please be aware, however, that tax is due on the second transaction only where, and to the extent that, the amount of tax payable on it is more than the tax due on the contract.

Where a contract is substantially performed before 31 October 2024 and completes on or after that date, a land transaction return is not required at completion and no further tax is chargeable if:

• further tax would have been chargeable at completion only because of the increase in the higher rate from three to five percentage points above the temporary rates in force between 23 September 2022 and 31 March 2025, or
• further tax would have been chargeable at completion only:
  • as a result of the increase in the higher rate from three to five percentage points above the temporary rates in force between 23 September 2022 and 31 March 2025, and
  • due to substantial performance taking place and being liable to SDLT in the period between 8 July 2020 to 30 September 2021 during which temporary rates of SDLT were chargeable.

Where a contract is substantially performed between 31 October 2024 and 31 March 2025, but completes on or after 1 April 2025, a land transaction return is not required at completion and no additional tax is chargeable if:

• further tax would have been chargeable at completion only because of the increase in the higher rates from three to five percentage points above the permanent rates of tax applying to transactions from 1 April 2025 or
• further tax would have been chargeable at completion only:
  • due to the increase in the higher rate from three to five percentage points above the permanent rates of tax applying to transactions from 1 April 2025, and
  • as a result of substantial performance taking place and being liable to SDLT in the period between 31 October 2024 to 31 March 2025 during which temporary rates for SDLT were chargeable.

Example 1

Amy entered into a contract to buy a property for £400,000 on 1 August 2024 and completes the contract without prior substantial performance and without variation on 1 January 2025. Amy is therefore liable to pay the higher rates on her purchase, because she:

• exchanged contracts before 31 October 2024,
• completed her transaction after that date, and
• no exclusions to the transitional rules apply.

Amy will need to pay the higher rates of SDLT on completion at a rate three percentage points above the residential rates of tax that apply between 23 September 2022 and 31 March 2025.

Example 2

Leo entered into a contract to purchase a property for £1.5m on 1 July 2024 and completes the contract without prior substantial performance and without variation on 1 May 2025. Leo is liable to pay the higher rates on his purchase, as he:

• exchanged contracts before 31 October 2024,
• completed his transaction after that date, and
• none of the exclusions to the transitional rules apply.

Leo will be liable to pay the higher rates of SDLT on completion at a rate three percentage points above the residential rates of tax that apply from 1 April 2025.

Example 3

Rachel entered into a contract to buy a property for £250,000 on 1 January 2021. She paid the seller the full asking price on 1 February 2021 with completion taking place on 1 November 2024. No changes to the contract that would affect the SDLT payable occur between substantial performance and completion. Rachel is liable to pay the higher rates on her purchase, because she:

• substantially performed the contract before 31 October 2024,
• paid the higher rates of SDLT based on the temporary rates in force between 8 July 2020 and 30 September 2021.

As any additional SDLT would only arise at completion because of the ending of those temporary rates and the increase in the higher rates from three to five percentage points above the residential rates,

Rachel will not need to send a land transaction return to HMRC at completion and no additional tax liability will be incurred.

Example 4

David entered into a contract to buy a property for £600,000 on 1 January 2025. He paid the vendor the full consideration on 1 February 2025 with completion taking place on 1 November 2025. David is liable to pay the higher rates on his purchase. There were no changes to the contract that would affect the SDLT payable between substantial performance and completion. As David:

• substantially performed the contract between 31 October 2024 and 31 March 2025, and
• paid the higher rates of SDLT at a rate of five percentage points above the temporary rates in force between 22 September 2022 and 31 March 2025, and
• as any additional SDLT would only arise at completion because of the ending of those temporary rates,

David will not need to send a land transaction return to HMRC at completion and no additional tax liability will arise.

For more information, please see SDLTM09845B, SDLTM09845A, SDLTM08000 and Higher rates of Stamp Duty Land Tax.

Conclusion

Clients buying additional residential properties should be made aware of the increased rates to SDLT, particularly where the contract is entered into on or after 31 October 2024, as the increased SDLT rate of five percentage points above the standard rate will apply, potentially making the purchase less appealing.

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Sources: Techlink

Date written: 14^th November 2024

Approved by Evolution Wealth Network Ltd on 15/11/2024.