- Temporary cut to stamp duty ends on 31 March 2025
- Move will lower property limit for first-time buyers to get stamp duty reduction
- First-time buyers buying a £625,000 home will pay £11,250 more in tax
- Home movers will pay up to £2,500 extra in tax
- Stampede to buy properties before rates rise could distort market
Laura Suter, director of personal finance at AJ Bell, comments:
“A decision by Labour not to extend temporary cuts to stamp duty rates in the Budget means those buying a new home will pay thousands more in tax from next April. Former Prime Minister Liz Truss introduced cuts to stamp duty for both first-time buyers and home movers, but they expire on 31 March next year and new Chancellor Rachel Reeves has chosen not to extend them.
“A cut to interest rates has only just reignited the property market after a period of sluggish sales, but now Rachel Reeves has thrown cold water on its fortunes with a big tax hike for home movers. First-time buyers will be hit the hardest as they see their tax-free band dramatically reduced. At the same time those buying a more expensive first home will no longer be eligible for the stamp duty break.
“Currently first-time buyers benefit from reduced stamp duty rates if they buy a property worth £625,000 or less. It means they pay no stamp duty on the first £425,000 of the value of the property and then 5% stamp duty on any remainder up to £625,000. However, from 1 April 2025 the property limit to be eligible for the discount will reduce to £500,000 and you’ll only get the first £300,000 of the value of the property stamp duty free, with 5% paid on any remainder up to £500,000.
“It means a first-time buyer purchasing a property at the current limit of £625,000 will face a £11,250 hike to their stamp duty bill from April, as they would no longer be eligible for the first-time buyer tax break.
“Those moving on to their next home will also pay thousands more, but will face a less severe hike. Currently the first £250,000 of a property purchase is free of stamp duty, and then you pay 5% on any amount up to £925,000. However, from April only the first £125,000 of a property purchase will be stamp duty free, with a 2% rate charged from £125,000 to £250,000. The re-introduction of the 2% band for stamp duty means that home movers will pay up to £2,500 more on their tax bill.
“We’ll inevitably see a flurry of people looking to lock in their home purchase before the deadline next March – with estate agents and solicitors braced for some long days ahead of the finish line. We saw a similar story when stamp duty breaks were introduced during the pandemic and then expired, with a boom in house sales ahead of the deadline. This rush to complete in time could push prices up and lead to more competition in the housing market.”
Tax difference for first-time buyers:
First time buyer rate changes:
Home mover changes:
