FINANCE
EXPERT COMMENT
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, but they expire on 31 March and Chancellor Rachel Reeves has chosen not to extend them. 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 rst home will no longer be eligible for the Stamp Duty break. It means a rst 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 rst time buyer tax break. We’ll inevitably see a urry 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 nish 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.
Stamp Collection The rise in Stamp Duty means a sudden extra cost for many first time buyers, explains Kay Hill
first time buyers paying up to £11,250 more. This worst case scenario, according to AJ Bell, is for a first time buyer purchasing a property worth £625,000. During March this would qualify for First Time Buyer Relief, so the buyer would pay zero on the first £425,000 and 5% tax on the following £200,000 (total of £10,000). In April, however, First Time Buyer Relief would no longer apply, leaving the buyer paying the Government £21,250 just for the pleasure of buying a first home. Jonathan Stinton, Head of Mortgage Relations at Coventry Building Society, says, “The Treasury is taking in huge sums of property taxes while homebuyers are racking up the debt. A Stamp Duty bill can be thousands of pounds, so if people don’t have that amount lying around they’ll probably need to borrow more to cover the tax on their home.” The inevitable rush to try to beat the deadline could also cause problems, “In the next few months, buyers will be increasingly likely to rush through purchases to avoid a hefty tax hike, causing a flurry of activity followed by a sharp drop after the relief has ended. This swell and burst effect isn’t going to help build long term stability in the market.”
Liz Truss became the shortest-serving UK Prime Minister in history when she resigned in October 2022 after just 45 days in office, following a disastrous mini-Budget. She did, however, manage to achieve one good thing in her short tenure – a reduction in the dreaded Stamp Duty Land Tax (SDLT). Not only did her Government raise the level at which the tax started, from £125,000 to £250,000, benefiting all buyers, she also improved the discount for first time buyers. Previously, first time buyers paid no SDLT on homes costing up to £300,000, and on homes up to £500,000 they paid nothing on the first £300,000 and 5% on anything between £300,000 and £500,000 (but more expensive homes incurred the standard rate). After the Budget, First time buyers paid nothing on the first £425,000 and then 5% Stamp Duty on any remainder up to £625,000, after which the standard rate became payable. The political landscape has changed, however, and failing an unlikely last minute U-turn by the Chancellor, Rachel Reeves, both changes will expire at the end of March, costing all homebuyers an additional £2,500 and leaving
Laura Suter, Director of
Personal Finance, AJ Bell
90 First Time Buyer February/March 2025
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