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Where to invest in property to avoid the biggest stamp duty bill

A flurry of activity in the UK housing market is predicted ahead of stamp duty changes in April, but where can you invest in property to minimise your tax bill?

Stamp duty land tax (SDLT) is currently payable on any residential property purchase in England and Northern Ireland for a home priced at £250,000 or higher. What’s more, first-time buyers get an additional discount, with no tax to pay on homes prices up to £425,000.

However, these thresholds are set to change from 1st April this year, when they will revert back to previous levels. This means any residential property purchase priced above £125,000 will be subject to stamp duty, while first-time buyer relief will only apply to the first £300,000 of a property purchase.

If you’re looking to invest in property to let out or as a second home, a 5% stamp duty surcharge also currently applies to any purchase above £250,000 – but this threshold will also fall to any purchase above £125,000 from 1st April.

With the average home in England currently costing around £306,494, according to the latest government figures, this means that the vast majority of property purchases made after 1st April will generate a stamp duty bill, which is something homeowners as well as those who invest in property in addition to their main residence, will need to factor in.

Investors remain keen on UK property

Since 31st October 2024, if you invest in property as a second home or to rent out, you must pay a stamp duty surcharge of 5% – this is a 2% increase from the previous level that had been in place since 2016.

This is in addition to the standard rates of stamp duty that apply to all residential property purchases over the minimum price threshold. You can find more information about the current and upcoming rates and thresholds on the government’s website.

However, despite the increase in stamp duty that took effect last October, research shows that property investors are largely undeterred by the higher rate.

According to a report from LCF Residential, all of the property transactions that were underway ahead of October’s Budget proceeded through to completion as planned, indicating that the change had had minimal impact to buyers’ plans.

With those who invest in property in addition to their main residence already subject to an additional surcharge of 3% before last October, the extra 2% seems to not have significantly affected the market, says Julie David, head of LCF Residential.

“People buying second homes or investment properties were already subject to a higher rate of stamp duty prior to the Budget and adding an additional 2% onto this doesn’t appear to have made any difference to the market so far.

“Out of the dozens of transactions we were working on, that were being bought by buy-to-let investors and second home buyers, each one has still gone ahead as planned.

“The Treasury’s aim with these changes was to give first-time buyers and those looking to move home an advantage over second-home buyers and landlords. However, it remains to be seen whether these changes are enough to significantly alter that market.”

Invest in property here for the lowest bill

Over the next couple of months, the UK property market is expected to defy usual seasonal trends, with analysts predicting a spike in activity from first-time buyers, homemovers, and those looking to invest in property ahead of the stamp duty changes.

However, with the average time it takes to complete on a property purchase currently standing at around 15 weeks, buyers and investors who are not already partway through the process may struggle to get their transaction over the line before the new threshold kicks in on 1st April.

Still, as stamp duty thresholds are graded based on the purchase value, lower priced properties can not only benefit the buyer with the smaller price tag, but they will also command a lower tax bill, which can make a big difference to the bottom line.

In England, there is a distinct north-south divide when it comes to the housing market. In recent years, this has also applied to the respective strength of activity and price rises within the market, with the north of England tending to outpace the south consistently in terms of capital appreciation. For those who invest in property, rental yields also tend to be higher in many parts of the north.

Overall, properties in the North East of England will come with the lowest stamp duty bill, as the average home there currently costs just £168,791, according to government figures. Stamp duty is only due on the portion of property above the £125,000 threshold from 1st April, meaning the bill will be minimal on the average home purchased in this region.

Yorkshire and the Humber is another location where buyers and investors not only get more for their money, but can avoid a hefty stamp duty bill. The average home in the region sells for £217,939.

Similarly, the North West (priced at £226,627), the East Midlands (£248,561), and the West Midlands (£254,921) are all regions where you can invest in property with a smaller stamp duty bill in England. For comparison, the average property in London is priced at £511,279, while in the South East it is £377,822.

Invest in property in one of the UK’s most lucrative locations. Get in touch with BuyAssociation today for more details, or browse some of our current opportunities here. 

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