Stamp Duty Land Tax (SDLT) is one of the major costs that property buyers need to know about, whether you are a homebuyer or an investor.

In October, the new government revealed its first Budget and made many changes that affected the UK property market. Overall, the changes were largely positive for anyone looking to buy UK property.

However, the changes to Stamp Duty were among the most contentious and it is important to be aware of what they mean for you.

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How did the Budget affect Stamp Duty?

Before the Budget, Stamp Duty rates in the UK were as follows:

  • Value of property up to £250,000 – 0% SDLT
  • The portion from £250,001 to £925,000 – 5% SDLT
  • The portion from £925,001 to £1.5m – 10% SDLT
  • The remaining amount is over £1.5m – 12% SDLT

Now, following the October 2024 Budget, they will change in April 2025 to the following levels:

  • Value of property up to £125,000 – 0% SDLT
  • The portion from £125,001 - £250,000 – 2% SDLT
  • The portion from £250,001 - £925,000 – 5% SDLT
  • The portion from £925,001 to £1.5m – 10% SDLT
  • The remaining amount is over £1.5m – 12% SDLT

Additionally, there is a surcharge for anyone buying an additional property whether that is a second home, a personal investment or you are buying through a limited company.

Before the Budget, that charge was 3%. Now, following the Budget it has risen to 5% and the change has taken effect immediately.

In effect, that means SDLT rates for investors in October 2024 are:

  • Value of property up to £250,000 – 5% SDLT
  • The portion from £250,001 to £925,000 – 10% SDLT
  • The portion from £925,001 to £1.5m – 15% SDLT
  • The remaining amount is over £1.5m – 17% SDLT

And they will be as follows from April 2025:

  • Value of property up to £125,000 – 5% SDLT
  • The portion from £125,001 - £250,000 – 7% SDLT
  • The portion from £250,001 - £925,000 – 10% SDLT
  • The portion from £925,001 to £1.5m – 15% SDLT
  • The remaining amount is over £1.5m – 17% SDLT

Finally, for overseas buyers there is an additional 2% on top of all other SDLT rates. That applies if you are not resident in the UK for at least six months of the year before your purchase.

The government’s SDLT calculator can help you work out your exact liability, but as with all tax matters, please make sure to speak to an independent financial advisor to ensure you understand what you need to pay.

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What do higher Stamp Duty (SDLT) rates mean for property investors?

It means that the price to buy UK investment property has increased. From the perspective of investors, these higher Stamp Duty rates might be troubling.

However, UK buy-to-let property is a long-term investment and the changes have to be viewed in that context.

The two income streams that come with property – capital gains and monthly rental income – both become more rewarding the longer you hold the property.

While the up-front cost may be higher, the latest forecast from Savills shows that investor profits are also likely to increase in the years to come:

  • 21.6% average house price growth by 2028
  • 18.1% average rental growth by 2028

In places like the North West, growth is predicted to be even higher than that.

The new property cycle means that this is an ideal time to invest in UK property and make the most of that growth.

In fact, the government raising Stamp Duty can be seen as further confirmation that those positive forecasts are correct and that house prices are set to increase.

With the return on investment predicted to be so much higher than the increase in Stamp Duty, you will still be able to make an impressive profit on UK property.

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Mortgage costs are falling

The second factor to bear in mind is that mortgage costs are lower now thanks to inflation falling and the Bank of England cutting the base rate of interest.

Following the first cut in August 2024, mortgage rates fell and the property market got an immediate boost.

With further cuts to the base rate predicted before the end of the year – and more in 2025 – we are likely to see market activity increase further and house prices pushed even higher.

This means that while SDLT is going up, other costs are coming down at the same time. Higher SDLT rates are a blow for property investors, but you are also spending less to invest and are likely to enjoy higher profits.

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Invest in Purpose-Built Student Accommodation to avoid Stamp Duty

Finally, you can invest in property without paying SDLT at all. For example, investing in student property gives you many of the benefits of residential investment while largely avoiding the costs of SDLT.

How? The key is the Stamp Duty thresholds. The tax kicks in at £125,000, but most PBSA is priced lower than that, so you won’t pay it at all.

That’s in addition to the other benefits you get when you invest in student property:

  • Guaranteed pool of tenants
  • High demand for a low number of available beds
  • Hassle-free investment
  • Not subject to market fluctuations

Vision and Axiom are two great examples of student property in locations where there is a real shortage and a high demand. Properties in both of these luxury buildings fall well below the threshold for Stamp Duty, too.

Overall, the changes to Stamp Duty should not discourage any investor from looking at UK property.

Whether you are interested in high-growth Manchester apartments for sale or student property that avoids SDLT entirely, our team are ready to help.

Get in touch today for more market insight and information about our available investment opportunities.