Understanding Recent Stamp Duty and Tax Changes: What You Need to Know

07/11/2024

In the wake of the September 2022 mini-budget, significant adjustments were made to the Stamp Duty landscape for residential properties. These changes will remain in effect for first-time buyers and home-movers until 31 March 2025. Here’s what you need to know:

Stamp Duty Relief for First-Time Buyers and Home-Movers

First-Time Buyers: You will not pay any Stamp Duty on properties costing up to £425,000.
Home-Movers: If you’re not a first-time buyer, you won’t pay any Stamp Duty on properties costing up to £250,000.

These adjustments provide valuable savings for many home buyers, making it easier to enter the property market.

Future Changes Post-March 2025

For purchases made on or after 1 April 2025, the Stamp Duty thresholds will revert as follows:

First-Time Buyers: The nil rate threshold will reduce to £300,000, meaning you will start paying Stamp Duty on any amount above this figure.
Home-Movers: For non-first-time buyers, the nil rate threshold will decrease to £125,000.

This means that if you’re looking to buy a property in the future, it’s essential to act before these changes take effect.

Inheritance Tax Updates

While there are no changes to the current inheritance tax (IHT) bands, allowances, or rates, the way IHT applies is evolving:

Inherited Pensions: Starting from April 2027, inherited pensions will no longer be exempt from inheritance tax.
Business and Agricultural Assets: From April 2026, estates containing these assets will continue to be IHT exempt for the first £1 million. However, any value above this will incur a tax with 50% relief, at an effective rate of 20%. Additionally, the relief for quoted shares designated as “not listed” on recognised stock exchanges will also be reduced to 50% from 6 April 2026.

Capital Gains Tax Adjustments

Capital Gains Tax (CGT) rates will see an increase:

Basic Rate Taxpayers: The CGT rate will rise from 10% to 18%.
Higher Rate Taxpayers: The rate will increase from 20% to 24%.

These new rates will align with the existing rates for property transactions, which will remain unchanged.

Changes to Buy-to-Let Stamp Duty

Starting from 31 October, Stamp Duty on buy-to-let and other investment properties will increase from 3% to 5% above the standard residential rates. Additionally, the tax regime for Furnished Holiday Lets will align with that of long-term residential lettings, taking effect from April 2025.

If you’re interested in how these changes may impact your buy to let mortgage strategy, reach out to us!

Income Tax Rates and Thresholds

Income tax rates and thresholds remain unchanged. Notably:

The 0% starting rate for savings income will remain at £5,000 for the 2025/26 tax year.
The personal savings allowance remains at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, with no allowance for additional rate taxpayers.

When Is the Best Time to Remortgage?

Determining the best time to remortgage involves finding a balance. It’s advisable to secure a new mortgage deal as early as possible; however, you want to ensure that the new mortgage offer does not expire before your current deal ends. The good news is that many lenders offer mortgage deals valid for up to six months, giving you ample time to research and secure a new deal, avoiding any early repayment charges.

To talk to us about how your mortgage have been affected by the recent Budget announcements, contact the team today and email us at admin@pm-financial.co.uk or give us a call on 0800 634 9250