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How will you be affected by the change in Stamp Duty?

Chancellor Rachel Reeves’ recent autumn budget provides important information for first-time buyers looking to enter the housing market in 2025. The budget confirms that the government will not scrap the planned stamp duty changes nor introduce an extension to the current rates of first-time buyer stamp duty relief. This decision means that first-time buyers should prepare for the upcoming policy shift, as these changes could affect affordability and the cost structure of purchasing a home.

Prospective buyers may need to adjust their financial planning accordingly to prepare for these changes and factor them into their home-buying strategies. This decision may also influence the timing of purchases, as buyers look to enter the market ahead of these shifts or prepare for potential increased costs in 2025.

The current stamp duty relief for first-time home buyers offers significant savings, but as of April 1, 2025, this relief is set to expire, meaning that the tax savings available today will no longer apply. Here’s a breakdown of what this change means and what first-time buyers should consider:

  1. Current Stamp Duty Relief for First-Time Buyers

  1. What Happens After March 31, 2025?

    • The threshold at which first-time buyers start paying stamp duty will decrease from £425,000 to £300,000.
    • This means that from April 1, 2025, first-time buyers purchasing a home over £300,000 will pay stamp duty on the amount exceeding this limit (rather than the current £425,000 threshold).
    • From 31st March 2025, first time buyers must pay 5% of the property value over £300,000.
    • First time buyers purchasing a home over £500,000 will no longer benefit from any first time buyer’s relief. This threshold is currently £625,000.
    • This change could mean a significant increase in upfront costs for first-time buyers, as even lower-priced homes will incur some level of stamp duty.
  1. What Should First-Time Buyers Do?

Summary

For first-time buyers, this change signals the end of a period of favourable tax treatment, making it critical for those close to purchasing to factor in both timing and potential cost adjustments. The current relief is an opportunity to reduce the financial barriers associated with buying a home, but with the rollback on the horizon, early action could be advantageous.

From March 31, 2025, the stamp duty rules for non-first-time buyers in England and Northern Ireland will revert to pre-2020 levels. Here’s a breakdown of how these changes will impact non-first-time buyers:

Key Changes for Non-First-Time Buyers

  1. Lower Threshold for Stamp Duty:

    • The 0% threshold for stamp duty will decrease from £250,000 back to £125,000.
    • This change means buyers will start paying stamp duty on any amount over £125,000, rather than the current threshold of £250,000.
  2. Reintroduction of the 2% Rate from £125,001 to £250,000

    • For properties priced between £125,001 and £250,000, a 2% stamp duty rate will apply.
    • Previously, non-first-time buyers benefited from a 0% rate up to £250,000, but this rate band will be reinstated, increasing the tax burden on properties within this price range.
  3. Return to the Pre-2020 Stamp Duty Rates

    • The full pre-2020 SDLT rate structure will return, meaning the following rates will apply:
      • 0% on the first £125,000
      • 2% on the amount between £125,001 and £250,000
      • 5% on the amount between £250,001 and £925,000
      • 10% on the amount between £925,001 and £1.5 million
      • 12% on any portion above £1.5 million

Practical Example of the Impact

 How Non-First-Time Buyers Can Prepare

In summary, these changes represent a significant shift for non-first-time buyers, who may see their stamp duty costs increase considerably. Factoring in these potential tax costs early on can help with budgeting and financial plIanning, especially for those looking to purchase in 2025 and beyond.