Young house buyers are being warned they face a massive stamp duty bill unless they buy before next spring.
An exemption to paying stamp duty that was implemented by the last Conservative government to help people onto the housing ladder is due to lapse in April 2025.
At present, a first-time buyer in England pays no stamp duty on properties up to £425,000. There is a reduced rate of 5 percent on the figure from £425,001 to £625,000.
This means that the majority (58 percent) of homes for sale in England are free from stamp duty to first-time buyers, although there are significant variations throughout regions.
However, from April 2025, the stamp duty-free threshold is set to reduce back down to £300,000. This would bring the proportion of properties that are free of the property tax down to 37 percent.
The net effect of the change means that a first-time buyer purchasing a £425,000 home will go from paying nothing to £6,250.
With the typical home purchase taking around three months once an offer has been accepted, the window of opportunity to take advantage of the stamp duty exemption is beginning to narrow.
Where will first-time buyers be worst hit?
Someone trying to buy in more expensive parts of the country will be worst affected when the rules change, according to research by Rightmove/
In London, fewer than one in ten homes will be free from a stamp duty charge if the old £300,000 threshold returns. People buying a first home in the South West and East of England would also be hard hit.
In the South West, 58 percent of homes are currently stamp duty free for first-time buyers, but this would fall back to just 34 percent of homes.
By contrast, the North East of England would be the least impacted. There the proportion of households that are exempt from stamp duty for first time buyers would come down from 86 percent to 74 percent.
The new Labour government is under pressure from Rightmove and other property experts to maintain the current support for young buyers, yet there has been no indication from the Chancellor Rachel Reeves as to whether she will do so.
Johan Svanstrom, chief executive of Rightmove, thinks the Government needs to also consider retaining the existing stamp-duty thresholds and providing additional help for first-time buyers.
He said: “We welcome the new Government’s meaningful ambitions for increasing housing supply.
“It should consider consumer support measures, by retaining the current first-time buyer stamp duty relief threshold of £425,000 in England, and looking at solutions to help first-time buyers with not only their deposit, but also being able to borrow enough from a lender.
“Mobility and housing is an important growth engine for the overall economy.”
Property expert at Rightmove, Tim Bannister, said: “The housing market is made up of many connected pieces – as owning your first home becomes more difficult, some people rent for longer, which places an additional strain on the rental sector.
“Stamp duty is a barrier to movement, and keeping the existing thresholds seems like a logical step to providing some first-time buyer support.”
Changes set in train by the last Tory government would see stamp duty increases for those who already have a home but plan to move up the ladder.
Home movers currently pay stamp duty if their new home costs more than £250,000, but this threshold for paying the tax is due to drop to £125,000 in March 2025.
This would take the tax bill on an average-priced home in England from £2,619 to £5,119, according to analysis by Coventry Building Society.
Jonathan Stinton, head of mortgage relations at Coventry Building Society, said: “The new Government has been fairly mute on stamp duty so far, but silence definitely isn’t golden when it could end up costing homebuyers thousands of pounds in extra tax.
“If we don’t hear anything between now and next April those looking to buy an average-priced home will have to fork out an additional £2,500 in property tax.
“The next Budget could be as early as September, and that’s when we really want to see the new Chancellor set out an ambitious, long-term plan for property tax that will give certainty to anyone thinking of buying or selling a home.
“There are only eight months left until temporary thresholds for property tax will halve to just £125,000, leaving all but a few buyers facing bigger up-front tax bills. That April deadline carries a risk of property market distortion.
“Within 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, so stamp duty should be high on the Chancellor’s priority list when preparing for the next Budget.”
