Stamp Duty explained after major change confirmed in Budget - see who has to pay it

Stamp Duty rates will change near-immediately under Labour plans, with the Budget aiming to help first-time buyers and primary home buyers more easily navigate the market

Stamp duty will increase for those buying a second home from tomorrow.

Chancellor Rachel Reeves announced in today's Budget that the tax would increase from October 31, saddling millions of wealthier Brits and landlords with higher charges. Second-homeowners are the primary targets of Labour's planned increase to stamp duty rates, with the Budget document stating it will help primary buyers and first-time buyers. But a notable omission in the Budget may mean that they pay more from next year.

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What is Stamp Duty?

Stamp Duty is a tax applied to home purchases above a certain threshold. There are separate systems in place for England, Northern Ireland, Scotland and Wales. People pay stamp duty when they buy a first home, a new primary home, or additional properties like a second home.

The current rates for single-home buyers are as follows:

First-time buyers: 0% on homes worth up to £425,000

Primary home buyers:

• Homes worth up to £250,000: 0%
• Homes worth between £250,001 and £925,000: 5%
• Homes worth between £925,001 and £1,500,00: 10%
• Homes worth over £1.5 million: 12%

The current rates for second home buyers - known as the Higher Rates for Additional Dwellings (HRAD) - are as follows:

• Homes worth £250,000: 3%
• Homes worth between £250,001 and £925,000: 8%
• Homes worth between £925,001 and £1.5 million: 13%
• Homes worth over £1.5 million: 15%

Stamp duty is structured so that buyers will pay the tax only on the amount they exceed the lower limit of their band. For example, someone buying a primary home worth 295,000 wouldn't pay a percentage of the first £250,000, but they would on the £45,000 over that lower limit. The single home rate is 5%, meaning that the buyer would ultimately end up paying an SDLT total of £2,250.

How will Labour's Budget change Stamp Duty?

The Chancellor included one announcement and one omission in her budget that have implications on Stamp Duty - with one near-immediate change and one set to come down the line. The government will alter the rate second-home owners pay from October 31, raising the minimum from 3% to 5%.

Ms Reeves only announced the change to the lowest band of the second-home buyer rates, with no news as to whether any of the following three will change in kind. Her Budget document states that the change will give people looking to move home or purchase their first property a leg-up over second home buyers, landlords and businesses buying properties for a portfolio.

It says: "From October 31, 2024 the Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax (SDLT) will be increased by two percentage points from 3% to 5%. Increasing HRAD ensures that those looking to move home, or purchase their first property, have a comparative advantage over second home buyers, landlords, and businesses purchasing residential property.

"This is expected to result in 130,000 additional transactions over the next 5 years by first-time buyers and other people buying a primary residence. This surcharge is also paid by non-UK residents purchasing additional property. The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by 2 percentage points from 15% to 17%."

The second way the government will change Stamp Duty was announced by omission. Ms Reeves did not say she would extend a Stamp Duty freeze introduced by Rishi Sunak's Conservative government in 2023. The freeze, introduced that November, increased the threshold after which buyers would need to start paying Stamp Duty from £125,000 to £250,000.

The measure applies to all property bought between September 23, 2022 and March 31, 2025, when it expires. The Chancellor has not extended the stamp duty freeze, meaning that buyers will start paying Stamp Duty on homes worth more than £125,000 after March 31 next year.