Top Tips for Saving Tax When Buying Property

Stamp Duty Land Tax (SDLT) is an important consideration when purchasing property or land in England and Northern Ireland. With upcoming changes set to take effect from 1st April 2025, now is a good time to assess whether buying a property before the deadline could be a beneficial move for you.

Understanding the Changes

From 31st March 2025, the SDLT thresholds will shift, impacting the amount of tax you will pay when purchasing property.

Below is a breakdown of the current and upcoming rates:

Rates Up to 31st March 2025

Example: If you buy a property for £295,000 before April 2025, your SDLT will be:

• 0% on the first £250,000 = £0
• 5% on the remaining £45,000 = £2,250
• Total SDLT = £2,250

Rates from 1st April 2025

Example: If you buy the same property for £295,000 after April 2025, your SDLT will be:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the remaining £45,000 = £2,250
• Total SDLT = £4,750

First-Time Buyers

If you are a first-time buyer, you may be eligible for SDLT relief.

Up to 31st March 2025

• 0% on properties up to £425,000
• 5% on the portion from £425,001 to £625,000
• No relief on properties above £625,000

From 1st April 2025

• 0% on properties up to £300,000
• 5% on the portion from £300,001 to £500,000
• No relief on properties above £500,000

Non-UK Residents

If you have not spent at least 6 months in the UK during the 12 months before your purchase, you will be classified as a non-UK resident for SDLT purposes. In this case, an additional 2% surcharge applies.

To estimate your tax liability, you can use HMRC’s Stamp Duty Calculator.

Reliefs & Exemptions

Certain buyers may be eligible for SDLT reliefs or exemptions. These include property developers who provide community amenities, building companies purchasing an individual’s home, employers buying an employee’s house, local councils making compulsory purchases, charities purchasing for charitable purposes, registered providers of social housing, and Crown employees.

In addition, there are specific situations where SDLT is not payable. These include cases where no money or payment is exchanged for the property, when a property is inherited through a will, or when it is transferred due to divorce or the dissolution of a civil partnership.

Purchases of freehold properties valued under £40,000 or leasehold properties assigned for seven years or more, with a premium below £40,000 and an annual rent of less than £1,000, are also exempt from SDLT.

Stamp Duty on Second Homes

If you are considering purchasing a second home, a higher SDLT rate will apply:

Rates for purchases up to 31 March 2025:

Rates for purchases on or after 1 April 2025:

How to Reduce SDLT on a Second Home

But there are ways to sidestep stamp duty on a second home, as long as your name isn’t on the ownership documents. One possibility is to have a family member, such as your child, listed as the official owner. You could support them by providing a gift for the deposit, contributing through a family savings plan, or even becoming a guarantor for their mortgage.

Also, if you plan to make the second home your primary residence and have already sold your first property, you can avoid paying additional stamp duty. However, if you purchase the second home before selling your current one, as long as you manage to sell it within three years, you’ll be eligible to claim a refund on the stamp duty you’ve paid.

For further guidance

With the upcoming tax changes, it’s crucial to assess your position and take advantage of any available reliefs or exemptions. If you’re considering buying a property, whether as a first-time buyer, investor, or homeowner looking to upgrade, seeking expert advice could save you thousands in tax.

If you’d like personalised guidance on minimising your tax liability, our experts are here to help. Contact us here to learn more!