A Guide to the Stamp Duty Changes 2022
On the 23rd of September 2022, then-Chancellor Kwasi Kwarteng announced as part of his mini-budget that there would be permanent changes to the Stamp Duty rates, effective immediately.
Since this announcement, much of the mini-budget plans have been reversed by now-Chancellor Jeremy Hunt, however, it looks like the Stamp Duty cut will stay in place as originally outlined in September.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a tax that must be paid when you buy a property or land in England or Northern Ireland that is valued over a certain amount. In Scotland, Land and Buildings Transaction Tax (LBTT) is paid instead of Stamp Duty, and in Wales, Land Transaction Tax (LTT) is paid in place of Stamp Duty.
Stamp Duty is paid when a freehold property, new or existing leasehold, or a shared ownership scheme property is bought. It is also paid when you are transferred property or land in exchange for payment, such as a mortgage or buying a share in a house.
What are the 2022 Stamp Duty Changes?
The changes to Stamp Duty Land Tax in 2022 have increased the residential nil-rate threshold on residential property value before Stamp Duty needs to be paid.
The thresholds for Stamp Duty Land Tax are now as follows:
- £250,000 for residential properties.
- £425,000 for first-time buyers buying a residential property valued at £625,000 or less.
- £150,000 for non-residential land and properties.
These changes mean that the buyer can purchase a residential property valued at a higher amount than they could previously before becoming liable to pay Stamp Duty Land Tax. The higher rate of 3% on additional dwellings remains in place.
What were the Stamp Duty thresholds prior to 23rd September 2022?
Prior to the 2022 changes, the residential nil-rate tax thresholds were as follows:
- £125,000 for residential properties.
- £300,000 for first-time buyers of properties valued at £500,000 or less.
How much Stamp Duty do you pay in 2022?
The amount of Stamp Duty Land Tax that needs to be paid depends on whether the land or property in question will be used as a residential property or as a non-residential or mixed-use property.
The amount to be paid will also change if the buyer is eligible for exemption or relief, such as for first-time buyers, and rates will differ if the buyer is buying an additional property while already owning one, or if the buyer is not a UK resident.
The rates on single residential properties valued over £250,000 have remained unchanged, and are as follows:
- The first £250,000 of property value – No SDLT to be paid
- The next £675,000 (£250,001 to £925,000) – 5%
- The next £575,000 (£925,001 to £1.5million) – 10%
- The remaining amount over £1.5million – 12%
This means that for a property purchased for £260,000, no SDLT will be owed on the first £250,000, but a 5% tax will be owed on the £10,000 over that amount, equalling £500.
For a property purchased for £1 million, no SDLT would need to be paid for the first £250,000, but of the remaining £750,000, a 5% tax would be owed on £675,000 (£33,750), and a 10% tax would be owed on the remaining £75,000 of value (£7,500), giving a total SDLT bill of £41,250.
Previously, there was a 2% Stamp Duty Tax on property values between £125,001 and £250,000, but this has now been scrapped because of the new changes.
For first-time buyers, no SDLT is paid on the first £425,000 of the property, and a 5% rate applies to the value between £425,001 and £625,000. If the property is worth more than £625,000, first-time buyer relief cannot be claimed.
Those buying an additional home (and not selling their previous property) will still have to pay an additional 3% on top of the new SDLT rates.
Non-UK residents (those not present in the UK for 6 months or more in the 12 months before the purchase) will usually have to pay a 2% surcharge on their residential property purchase
What do these changes mean for businesses associated with the property and conveyancing industry?
Overall, the changes to Stamp Duty in 2022 are positive for those buying a residential home. The changes are also expected to have a negligible impact on businesses associated with the property and conveyancing industry and are not expected to impact civil society organisations.
There may be one-off costs during familiarisation with the change, and minor IT and software changes may also need to be made to fall in line with the change, but there are no expected continuing costs.
If you are looking for a specialist mortgage broker to get the best deal on a mortgage for your property purchase, please get in touch.