The Autumn Budget 2024 introduced material amendments to the Stamp Duty Land Tax (SDLT) framework. These changes significantly impact residential property transactions in England and Northern Ireland. The revisions to the Residential Property Tax came into force on 31 October 2024.
Increased Surcharge for Additional Properties. The SDLT surcharge for second homes and buy-to-let properties has risen from 3% to 5% above standard rates.
Higher Rates for Corporate Purchasers. The SDLT rate for corporate entities and non-UK residents buying residential properties over £500,000 has increased from 15% to 17%. This measure ensures that these entities contribute proportionately to the tax system, particularly when acquiring high-value properties for non-commercial use.
Objectives and Anticipated Outcomes of the Residential Property Tax
1. Enhancing Housing Affordability
The government is raising SDLT rates on additional properties to deter speculative buying and reduce investor demand that has inflated property prices, especially in areas like London. These measures aim to stabilise prices and improve access for first-time and primary residence buyers.
2. Improving Housing Availability
These reforms seek to increase housing supply for primary residences by discouraging additional property purchases, particularly in shortage areas. By raising SDLT rates on additional properties, the government aims to limit investment purchases, freeing homes for primary residents. This shift favours personal ownership over investment, increasing availability for everyday living, addressing housing shortages, and supporting community stability.
3. Generating Additional Revenue
4. Higher SDLT rates aim to significantly boost government revenue, supporting public services like healthcare and education and infrastructure projects like road improvements. Healthcare and education benefit from investments in facilities and resources, while infrastructure improvements enhance economic growth through better transportation and job creation. Addressing Corporate Ownership of Residential Properties
The revised SDLT rates for corporate acquisitions aim to reduce properties held by companies for investment or short-term rentals. This ensures more homes are available to individual purchasers and families. Corporate investment in residential properties often leads to homes being held for investment rather than occupancy. By increasing SDLT rates for corporate acquisitions, the government discourages companies from investing in residential properties.
Anticipated Outcomes
1. Deterrence of Speculative Purchases
The elevated SDLT rates aim to deter speculative buying, especially among investors in second homes or buy-to-let properties. Speculative buying is high-risk for investors but potentially offers incredibly high financial rewards.
There is the question of empty homes. There are 261,000 empty homes in the UK, according to a publication by Shelter in 2024, and the government has promised £1.25 billion to bring these homes back into use. Many of these homes have ‘owners’ who are missing or unknown, which poses additional blockers – will it be the empty homes officers at local authorities to locate these owners and bear the cost of the works?
2. Stabilisation of Property Prices
The elevated SDLT rates is designed to reduce investor demand for additional properties, including second homes and buy-to-let investments. Consequently, this reduction is crucial for stabilising property prices, which speculative buying has driven up. As a result, the market could become less overheated with fewer investors competing, leading to more stable and predictable prices.
The theory is that stable prices allow first-time buyers to plan their finances more effectively and secure mortgages, fostering homeownership among younger generations.
3. Government Revenue
The increased SDLT rates are expected to generate significant additional revenue for the government. Consequently, this revenue could be reinvested in public infrastructure and services, supporting community development.
Possible impacts on the Residential Property Market.
1. Short-Term Adjustments. The immediate aftermath of these reforms is likely to see a decrease in the acquisition of second homes. There may also be a slowdown in investment properties.
2. Long-Term Stabilisation. Over time, the market is expected to stabilise. Speculative purchasing will subside. This change will result in more predictable property valuations. These will align with genuine demand from homebuyers.
3. First-Time Buyers. These measures could significantly improve the accessibility of the market for first-time buyers. This is particularly true in regions where investor competition has previously hindered their entry.
4. Implications for Landlords and Investors. Landlords and property investors will face heightened acquisition costs, which may prompt them to enhance their existing portfolios rather than strategically expand them.
5. Impact on Corporate Buyers. The increased SDLT rate for corporate purchasers is expected to reduce corporate activity in the residential market.
Tens of thousands of people will be affected by this new legislation.
1. Lawyers (corporate, commercial, and property) will need to tailor their advice according to the new rules.
2. Those buying and selling properties will also need to understand the ramifications, which a decent solicitor can provide.
3. Local authorities may need new legal assistance to find the best value way to meet demand.
4. Landlords coming into financial difficulties will be seeking legal and financial advice.
If you need an experienced solicitor or barrister to advise you about any of the above, please speak to Dee at www.findmeasolicitor.co.uk or email dee@findmeasolicitor.co.uk who will be able to help you find the best legal advice completely free of charge.
References
1. https://www.gov.uk/guidance/stamp-duty-land-tax-corporate-bodies
2. Higher rates of Stamp Duty Land Tax – GOV.UK
3. https://landtaxadvice.co.uk/book/principles-for-understanding-sdlt/principles-for-understanding-sdlt/when-sdlt-is-payable/sdlt-rates-and-calculations/15-high-sdlt-rate-for-corporate-owned-resi-properties
4. https://www.gov.uk/government/statistics/uk-stamp-tax-statistics/uk-stamp-tax-statistics-2023-to-2024-commentary
5. Stamp duty land tax on residential property: government policy up to 2021 – House of Commons Library
6. https://londragazete.com/english/281509/guner-gumus-analyzes-the-impact-of-stamp-duty-increases-on-the-real-estate-market/
7. https://globalinvestmentproperty.co.uk/stamp-duty-and-buy-to-let-strategies-to-navigate-the-5-surcharge/
8. https://blanchardsbailey.co.uk/insights/stamp-duty-land-tax-sdlt-changes-2024-updated-sdlt-rates-and-key-adjustments-for-property-buyers
9. https://www.foys.co.uk/news/property/understanding-the-new-stamp-duty-increases-what-labours-first-budget-means-for-property-buyers-and-investors/
10. 2024 Autumn Budget Summary for Landlords – UK Landlord Tax
11. https://commonslibrary.parliament.uk/research-briefings/cbp-9689/
12. https://ehnetwork.org.uk/files/library-item/Shelter%20|%20Home%20Again%20-%20April%202024.pdf