Stamp Duty on second homes: all you need to know
If you're considering purchasing a second home or investing in a buy-to-let property, recent announcements from the Autumn Budget, presented by Chancellor Rachel Reeves, could significantly impact your plans.
With upcoming changes to the Stamp Duty tax rate and adjustments to tax thresholds set for 2024 and 2025, it's essential to understand these updates and prepare accordingly. At M&M Estate Agents in Gravesend, we’re here to help you navigate these changes and make the best decisions for your property investments.
Key Stamp Duty Changes for Second Homes
Starting from 31 October 2024, the Stamp Duty surcharge for second homes and buy-to-let properties will increase. While this change won't affect buyers of primary residences, it will raise the costs for those purchasing additional properties.
- Previous Surcharge A 3% additional Stamp Duty rate applied to second properties.
- New Surcharge: From 31 October 2024, the surcharge will rise to 5%.
Timing Matters: Avoiding Unnecessary Surcharges
If you're buying a property with the intention of making it your main residence, timing is crucial. You’ll need to sell your current home before completing the purchase of your new property to avoid the 5% surcharge. If the sale of your old home happens within 36 months after buying your new home, you can apply for a refund of the surcharge.
This makes it essential to coordinate your sale and purchase timelines carefully to manage your financial obligations effectively.
Stamp Duty Threshold Changes Coming in Spring 2025
In addition to the surcharge increase, the Stamp Duty thresholds will revert to pre-2022 levels on 1 April 2025. Here’s what the thresholds will look like:
Current Thresholds (until April 1, 2025):
- Up to £125,000: 0%
- £125,001 to £250,000: 0%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
New Thresholds (from April 1, 2025):
- Up to £125,000: 0%
- £125,001 to £250,000: 2%
- £250,001 to £925,000: 5%
- £925,001 to £1.5 million: 10%
- Above £1.5 million: 12%
Purchases between £125,001 and £250,000 will now attract a 2% Stamp Duty rate, introducing an extra cost of at least £2,500 on transactions within this range.
Practical Implications for Buyers
- Higher Costs for Investors: The 5% surcharge will directly impact buy-to-let investors and those purchasing holiday homes.
- Careful Coordination for Main Residence Purchases: To avoid the surcharge, ensure your current home sale is completed before finalising the new purchase. The 36-month refund window provides some flexibility if delays occur.
- Advancing Purchases to Benefit from Lower Thresholds: Buyers considering properties within the lower bands might want to complete their purchases before the thresholds revert in April 2025.
- Budgeting for Stamp Duty: With Stamp Duty due within 14 days of property completion, having funds ready is crucial. Work with your solicitor or conveyancer to ensure a smooth transaction.
How We Can Help
At M&M Estate Agents, we understand the complexities of these changes and their impact on your buying decisions. Whether you're a seasoned investor or buying your first second home, our team is here to provide tailored advice and support.
Get in touch with us today to discuss how these changes affect you and explore your options. Let's make sure you're prepared and confident in your next property move.