Policy paper

Stamp Duty Land Tax — temporary increase to thresholds

Published 28 November 2022

Who is likely to be affected

Purchasers of residential property in England and Northern Ireland.

General description of the measure

This measure temporarily increases the amount that a purchaser can pay for residential property before they become liable to Stamp Duty Land Tax (SDLT), while maintaining the higher rate of 3% on additional dwellings. It increases the residential nil-rate tax threshold from £125,000 to £250,000.

The nil-rate threshold for First Time Buyers’ Relief is also temporarily increased from £300,000 to £425,000 and the maximum property value that is eligible for First Time Buyers’ Relief is increased to £625,000.

The measure means that all purchasers of residential property bought between 23 September 2022 and 31 March 2025 will pay less or no SDLT.

Policy objective

The SDLT cut announced by the government on 23 September 2022 will remain in place until 31 March 2025 to support the housing market and the hundreds of thousands of jobs and businesses which rely on it. This will lower the upfront costs of moving home and support those looking to get on and up the housing ladder.

The government has announced that this measure will end on 31 March 2025 as part of its commitment to fiscal responsibility and ensuring trust and confidence in our national finances.

Background to the measure

This measure was initially announced on 23 September 2022 as a permanent change. At Autumn Statement 2022, the government announced that the increase in the residential nil-rate threshold will end on 31 March 2025.

No consultation has been held as this is a temporary change which is wholly relieving. It would not be in the public interest to consult, as this may have an adverse effect on the housing market if buyers delayed purchases during the consultation period.

Detailed proposal

Operative date

This measure applies to transactions with an effective date (usually the date of completion) from 23 September 2022 to 31 March 2025 (the ‘temporary relief period’).

This measure does not apply to Scotland or Wales where devolved land transaction taxes apply.

Law before the measure

The main SDLT legislation is in Part 4 of the Finance Act 2003. All statutory references are to that Act.

The standard residential rates for SDLT applicable to purchases other than higher rates purchases can be found at Table A: Residential of section 55(1B):

Relevant consideration	Percentage
Up to £125,000	Nil
The next £125,000 (the portion from £125,001 to £250,000)	2%
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount (the portion above £1.5 million)	12%

The rates for purchases where rent is taxed can be found at Table A: Residential in paragraph 2(3) of Schedule 5:

Relevant consideration	Percentage
Up to £125,000	Nil
Over £125,000	1%

The rates for purchases subject to the higher rates can be found in Table A: Residential at paragraph 1(2) of Schedule 4ZA:

Relevant consideration	Percentage
Up to £125,000	3%
The next £125,000 (the portion from £125,001 to £250,000)	5%
The next £675,000 (the portion from £250,001 to £925,000)	8%
The next £575,000 (the portion from £925,001 to £1.5 million)	13%
The remaining amount (the portion above £1.5 million)	15%

Section 57B and Schedule 6ZA make provisions for qualifying first time buyers to pay tax under rates and bands set out in Table A: Residential at paragraph 4 of Schedule 6ZA:

Relevant consideration	Percentage
Up to £300,000	Nil
Any remainder not exceeding £500,000	5%

First Time Buyers’ Relief is restricted to purchases where the amount paid is £500,000 or less as specified in paragraph 1(2).

Where a contract for a purchase is substantially performed and then completed by a conveyance, section 44(8) applies to ensure any additional tax due upon completion is chargeable.

Revisions under the measure

Legislation contained in the Stamp Duty Land Tax (Reduction) Bill will amend Part 4 of Finance Act 2003. For transactions where the effective date is from 23 September 2022 to 31 March 2025 (the temporary relief period), the following residential rates of SDLT apply:

Table A of section 55(1B) (for purchases other than higher rates purchases):

Relevant consideration	Percentage
Up to £250,000	Nil
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount (the portion above £1.5 million)	12%

Table A at paragraph 2(3) of Schedule 5 (for rent):

Relevant consideration	Percentage
Up to £250,000	Nil
Over £250,000	1%

Table A at paragraph 1 of Schedule 4ZA (for higher rates purchases):

Relevant consideration	Percentage
Up to £250,000	3%
The next £675,000 (the portion from £250,001 to £925,000)	8%
The next £575,000 (the portion from £925,001 to £1.5 million)	13%
The remaining amount (the portion above £1.5 million)	15%

Table A at paragraph 4 of Schedule 6ZA (for First Time Buyers’ Relief):

Relevant consideration	Percentage
Up to £425,000	Nil
Any remainder not exceeding £625,000	5%

For transactions where the effective date is within the temporary relief period, the £500,000 specified in paragraph 1(2) of Schedule 6ZA is increased by £125,000. The effect is to increase the maximum amount purchasers may pay while remaining eligible to claim First Time Buyers’ Relief from £500,000 to £625,000 during the temporary relief period.

Transactions with effective dates from 1 April 2025 onwards will be subject to the rates shown above under ‘Law before the measure’ except where substantial performance of the contract took place during the temporary relief period and completion took place after the end of the temporary relief period. In that case, provided there is no variation in the contract, section 44(8) is disapplied and the transaction will continue to qualify for the reduced rates applicable during the temporary relief period.

Summary of impacts

Exchequer impact (£m)

	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
Increases to nil-rate thresholds from 23 September 2022 [footnote 1]	-745	-1085	-1045	-1195	-1440	-1635
Ending the Growth Plan 2022 change on 31 March 2025	-30	-95	+180	+850	+1440	+1635

These figures are set out in table 5.1 of Autumn Statement 2022 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2022.

Adjustments will be made to Wales’ and Scotland’s block grants. The impact of this adjustment is included in the tables above.

Economic impact

Reductions in SDLT rates, or increases in the thresholds, support house purchases and so property transactions and house prices. Increased property transactions add to residential investment and spending on durable goods.

As this measure is temporary it will incentivise people to bring forward transactions to benefit from the increases in the thresholds. This will lead to an increase in transactions before the end of the scheme and a commensurate reduction in transactions once the measure expires.

Impact on individuals, households and families

Individuals and their families buying a residential property are expected to be positively impacted by a reduction of SDLT as it will make it easier to buy a home. Overall, there is expected to be no negative impact on family formation, stability or breakdown as this proposal could make it easier for families to purchase a family home when they were previously unable to.

Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.

Equalities impacts

The benefits of this measure will fall to those who are buying residential property, which is expected to be in line with the existing distribution of home ownership. This measure is not expected to impact on this distribution for any protected group.

Impact on business including civil society organisations

This proposal is expected to have a negligible impact on businesses associated with the property and conveyancing industry.

One-off costs will include familiarisation with the change and could also include making minor IT and software changes to take account of the change. There is expected to be no continuing costs. This measure is not expected to impact civil society organisations.

Customer experience is expected to remain broadly the same as it does not significantly alter existing processes.

Operational impact (£m) (HMRC or other)

HMRC will have to incur costs to change IT systems. These are estimated to be in the region of £300,000.

There will also be extra staff costs to support customers. These are estimated to be in the region of £2.4m.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax returns.

Further advice

If you have any questions about this change please consult the guidance on GOV.UK or contact the HMRC SDLT Helpline.

Declaration

Victoria Atkins MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.

1. Changes reflect: the increase to nil rate band from £125,000 to £250,000, increase to First Time Buyers Relief nil-rate threshold from £300,000 to £425,000, increase to First Time Buyers Relief property eligibility from £500,000 to purchases up to £625,000. ↩