๐ฆ๐๐ฎ๐บ๐ฝ ๐๐๐๐ ๐ผ๐ป ๐๐ฒ๐ฐ๐ผ๐ป๐ฑ ๐ต๐ผ๐บ๐ฒ๐: ๐ฎ๐น๐น ๐๐ผ๐ ๐ป๐ฒ๐ฒ๐ฑ ๐๐ผ ๐ธ๐ป๐ผ๐
Thinking of buying a second home? The recent Autumn Budget announcement by Chancellor Rachel Reeves has significant implications for those planning to buy a second home or invest in a buy-to-let property in the coming year.
With changes to the Stamp Duty tax rate and adjustments to tax thresholds set to take effect in 2024 and 2025, prospective buyers will want to understand these updates and plan accordingly. Hereโs a breakdown of what to expect and how you can best navigate these changes:
๐๐ฒ๐ ๐ฆ๐๐ฎ๐บ๐ฝ ๐๐๐๐ ๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ๐ ๐ณ๐ผ๐ฟ ๐๐ฒ๐ฐ๐ผ๐ป๐ฑ ๐ต๐ผ๐บ๐ฒ๐
Starting 31 October 2024, the Stamp Duty surcharge for second homes and buy-to-let properties will increase. While buyers of main residences remain unaffected by this change, those purchasing an additional property will face an increased tax burden. Hereโs how it works:
Previous surcharge: Those buying a second property would pay an additional 3% on top of the standard Stamp Duty rates.
New Surcharge: As of 31 October 2024, the surcharge will increase by 2% to 5%, adding further costs for buyers of second properties.
๐๐บ๐ฝ๐ผ๐ฟ๐๐ฎ๐ป๐ ๐ป๐ผ๐๐ฒ ๐ผ๐ป ๐๐ถ๐บ๐ถ๐ป๐ด
If you're buying a property with the intention of making it your main residence, the timing of your purchase and sale matters. Even if the new property is intended to become your primary home, youโll still pay the 5% surcharge unless you have completed the sale of your current home before the purchase completes on the new one. However, if your old home sells within 36 months, you can apply for a refund of the surcharge.
This detail emphasises the importance of coordinating sale and purchase timelines closely if youโre planning a move to a new primary residence.
๐ฆ๐ฝ๐ฟ๐ถ๐ป๐ด ๐ฎ๐ฌ๐ฎ๐ฑ ๐ฏ๐ฟ๐ถ๐ป๐ด๐ ๐ป๐ฒ๐ ๐ฆ๐๐ฎ๐บ๐ฝ ๐๐๐๐ ๐๐ต๐ฟ๐ฒ๐๐ต๐ผ๐น๐ฑ๐
Another update to keep in mind is the upcoming change to Stamp Duty thresholds in Spring 2025. The current thresholds, which were raised in 2022 to help alleviate the tax burden on homebuyers, will revert to pre-2022 levels as follows:
๐๐๐ฟ๐ฟ๐ฒ๐ป๐ ๐ฆ๐๐ฎ๐บ๐ฝ ๐๐๐๐ ๐ง๐ต๐ฟ๐ฒ๐๐ต๐ผ๐น๐ฑ๐ (๐๐ป๐๐ถ๐น ๐๐ฝ๐ฟ๐ถ๐น ๐ญ, ๐ฎ๐ฌ๐ฎ๐ฑ)
Up to ยฃ125,000: 0%
ยฃ125,001 to ยฃ250,000: 0%
ยฃ250,001 to ยฃ925,000: 5%
ยฃ925,001 to ยฃ1.5 million: 10%
Above ยฃ1.5 million: 12%
๐ก๐ฒ๐ ๐ง๐ต๐ฟ๐ฒ๐๐ต๐ผ๐น๐ฑ๐ (๐ฒ๐ณ๐ณ๐ฒ๐ฐ๐๐ถ๐๐ฒ ๐๐ฝ๐ฟ๐ถ๐น ๐ญ, ๐ฎ๐ฌ๐ฎ๐ฑ)
Up to ยฃ125,000: 0%
ยฃ125,001 to ยฃ250,000: 2%
ยฃ250,001 to ยฃ925,000: 5%
ยฃ925,001 to ยฃ1.5 million: 10%
Above ยฃ1.5 million: 12%
The reduction in thresholds means that purchases between ยฃ125,001 and ยฃ250,000 will be subject to a 2% Stamp Duty rate, which is currently zero. This change could add a minimum of ยฃ2,500 to transactions within that range, so buyers might consider advancing their timeline if they aim to avoid this additional cost.
๐ฃ๐ฟ๐ฎ๐ฐ๐๐ถ๐ฐ๐ฎ๐น ๐ถ๐บ๐ฝ๐น๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป๐ ๐ณ๐ผ๐ฟ ๐๐ฒ๐ฐ๐ผ๐ป๐ฑ ๐ต๐ผ๐บ๐ฒ ๐ฏ๐๐๐ฒ๐ฟ๐
Increased costs for investors: The additional 5% surcharge on second homes from October 2024 will have a direct impact on buy-to-let investors and those purchasing holiday homes.
Coordinating closely for main residence switches: If youโre buying a new property to be your main residence, itโs crucial to complete the sale of your current home before finalising the new purchase to avoid the surcharge. If the sale is delayed, remember that the refund window remains open for 36 months.
Buying ahead of the spring threshold reversion: For buyers of primary residences or second homes in the lower property bands, purchasing before the changes come into play will help lock in the more favourable Stamp Duty thresholds.
Budgeting for Stamp Duty: Stamp Duty is due within 14 days of property completion, so itโs essential to have the funds ready to avoid late payment penalties or interest. Work closely with your solicitor or conveyancer to ensure a smooth transaction and a clear understanding of your tax obligations.
With these changes on the horizon, timing will be critical for anyone planning to purchase a second home or buy-to-let property. Understanding the new rates and thresholds can help you make informed decisions about when to buy and how to budget for additional costs. Consulting with a property expert or financial advisor can also help you navigate these changes and maximise your investment strategy. If you have any concerns then please contact me Tony Beales on 07970203228 or drop me an email to tony@millbanks.com