On 23 September 2022, the then Chancellor Kwasi Kwarteng announced changes to stamp duty land tax when purchasing residential property, as part of the Government’s Growth Plan.

In his statement to the House, Mr Kwarteng said these measures would “mean that 200,000 more people will be taken out of paying stamp duty altogether.” The Commons approved a motion giving these changes immediate effect. 

This motion – a ‘Provisional Collection of Taxes Motion’ – has temporary effect. The Government must introduce legislation to make the changes permanent. The Stamp Duty Land Tax (Reduction) Bill 2022-23 would do this. This Bill was introduced on Monday 24 October and had its second reading that day.

What is stamp duty land tax?

Stamp duty land tax (SDLT) is charged on the purchase of property or land. It applies in England and Northern Ireland only. There are separate property transaction taxes in Scotland (the Land and Buildings Transaction Tax) and Wales (the Land Transaction Tax).

The amount of SDLT paid depends largely on three factors:

  • The type of property sold. The rates of SDLT differ between residential property and commercial property.
  • The selling price. The rates of SDLT are graduated so that more expensive properties face progressively higher tax rates. Rates only apply to the part of a property’s selling price that falls within designated value bands. This ‘slice’ design of tax rates and tax bands is similar to the design of income tax.
  • The purchaser. If someone already owns a dwelling, they pay a 3 percentage point surcharge on standard tax rates when buying additional residential properties. Non- UK residents pay an extra 2 per cent surcharge when paying SDLT.

There are a variety of tax reliefs which purchasers may be entitled to claim, reducing the amount of tax paid on a transaction.

First-time buyers of residential property may claim tax relief if the purchase price is no more than £625,000. If someone is eligible they are charged tax at 0% on the first £425,000, and 5% on the remainder.

How does SDLT apply to house sales?

Table 1 shows SDLT rates and bands for residential property prior to Kwasi Kwarteng’s Announcement.

Table 1: SDLT on residential property

SDLT rateSDLT rate
Property valueBefore 23 September 2022 From 23 September 2022
£0 -£125,000ZeroZero
Slice from £125,001
(the next £125,000)
lice from £250,001
(the next £675,000)
Slice from £925,000
(the next £575,000)
-£1.5 million10%10%
Slice above £1.5 million12%12%

The examples below show how this works in practice, with the amount of SDLT that would have been paid under the rates before 23 September, and after.

Example 1: Before 23 September

If someone purchased a house before 23 September for £1 million, the amount of SDLT charged would be:

  • 0% on the first £125,000 = £0
  • 2% on the next £125,000 = £2,500
  • 5% on the next £675,000 £33,750
  • 10% on the remaining £75,000 £7,500

Total SDLT=£43,750.

Example 2: From 23 September

From 23 September 2022, if someone purchased a house for £1 million, they would pay £2,500 less in SDLT. Their SDLT calculation is as follows:

  • 0% on the first £250,000 = £0
  • 5% on the next £675,000 = £33,750
  • 10% on the final £75,000 £7,500

Total SDLT =£41,250.

  • HM Revenue & Customs (HMRC) provide an online SDLT calculator for purchasers to workout how much tax they will pay.
  • HMRC’s Stamp Duty Land Tax Manual provides detailed guidance.
  • How much money does SDLT raise? In 2021/22 SDLT raised £14.3 billion. Of this, £10.1 billion was raised from residential property and £4.2 billion was raised from non-residential property. These figures were published by the OBR in March 2022.
  • HMRC publish detailed statistics on the receipts from SDLT. This includes an overview of recent policy reforms to the tax. The Office for Budget Responsibility collate statistics on SDLT, as well as the property transaction taxes that apply in Scotland and Wales.

What changes to SDLT have been announced?

Chancellor’s statement on 23rd September

On 23rd September the then Chancellor Kwasi Kwarteng announced three changes to SDLT:

  • An increase in the threshold up to which SDLT is not paid – the ‘nil-rate threshold’ – from £125,000 to £250,000.
  • An increase in the nil-rate threshold for first-time buyers relief, from £300,000 to £425,000
  • An increase in the maximum amount first-time buyers can buy a house for and still be eligible for relief, from £500,000 to £625,000. The then Chancellor confirmed these changes were a permanent cut to SDLT, effective immediately.

The then Chancellor confirmed these changes were a permanent cut to SDLT, effective immediately.

Chancellor’s statement on 17th October

On 17th October Chancellor Jeremy Hunt set out a series of changes to the Government’s fiscal plans. Mr Hunt confirmed that the changes to SDLT thresholds announced the previous month would remain in place.

Chancellor’s Autumn Statement on 17th November

On 17th November the Chancellor presented his Autumn Statement. As part of this Mr Hunt announced that the changes to SDLT thresholds would be temporary, and would remain in place until 31st March 2025.

How are these measures implemented?

Temporary implementation from 23 September On 23 September the House of Commons approved a ‘Provisional Collection of Taxes Motion’ to give immediate effect to these changes. This motion has temporary effect. There is precedent for this approach: in July 2020 the Government introduced a temporary increase in the SDLT nil-rate (0%) band for residential property, as part of its response to the Covid-19 pandemic. Provision for this tax cut was made in a similar ‘stand alone’ Bill, though in this case the Bill completed all of its stages on the same day. The Commons Library briefing  Stamp Duty Land Tax (Temporary Relief) Bill 201921 provides further details.

Permanent implementation with the Bill

It is necessary for the Government to introduce legislation to give these changes permanent effect. The Stamp Duty Land Tax (Reduction) Bill 2022-23 would do this. The Bill was introduced on 24 October 2022, and had its second reading on that day. A date for the Bill’s remaining stages in the House of Commons has not been announced as yet.

HMRC has published an impact assessment on these changes to SDLT thresholds. This observes that the Government had not consulted on this measure because “this is a change which is wholly relieving.” It notes that “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.” 

As part of the Autumn Statement 2022 the Government has stated that it will amend the Stamp Duty Land Tax (Reduction) Bill to provide that the changes to SDLT thresholds are temporary, and remain in place until 31 March 2025. HMRC has published an impact assessment of this change. It is estimated that the temporary increase in SDLT thresholds will cost £775 million in 2022/23, rising to £1,180 million in 2023/24 (for details see, Autumn Statement, CP 751, November 2022, Table 5.1 items 41 and 57).

How will these changes affect the Prime Market?

The Prime Market is not immune to the impact of an economic downturn, or impervious to the headwinds that are being felt across the globe. The lack of consideration shown to the Prime Market in the Autumn statements of both chancellors (we had three chancellors in 2022), shows a lack of understanding of the role that this market plays within our economy. From the stamp duty generated, to the refurbishment works that are commissioned by incoming owners; the prime market contributes to the domestic economy in a truly unique and impactful manner. It is therefore reasonable to expect the government of the day to take steps to ensure that this market is able to continue to thrive even in the midst of the current economic uncertainty.

The question is not however a red herring, as the fact that there have been no changes in stamp duty for property purchases in excess of £1,500,000 is a decision in itself. The decision to not take reduce stamp duty or augment the way in which stamp duty is levied on purchases in excess of £1,500,000, at a time when mortgage rates are seeing sustained rises, mortgage affordability requirements are becoming more stringent, and interest rates rises continue at a pace, is effectively making it increasingly expensive to purchase Prime and Super-Prime real estate.

Articles by Lucien Cook, Head of Research for Savills, the leading authority in the field.



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