Warning of large bill for first-time house buyers unless they beat tax change deadline

Thousands of first-time buyers face a massive stamp duty bill unless they are able to buy a property in the next few months

First-time home buyers are being cautioned about a potential hefty stamp duty bill if they don't purchase before spring next year. The current exemption from stamp duty, introduced by the previous government to assist individuals in getting onto the property ladder, is set to expire in April 2025.

Currently, first-time buyers in England are exempt from paying stamp duty on properties valued up to £425,000, with a reduced rate of 5% applied to amounts between £425,001 and £625,000. This means that a majority (58%) of homes for sale in England are exempt from stamp duty for first-time buyers, although this varies significantly across regions.

However, from April 2025, the threshold for stamp duty exemption will drop back down to £300,000, reducing the proportion of properties exempt from this tax to 37%. The impact of this change would mean a first-time buyer of a £425,000 property would go from paying nothing to a £6,250 bill.

Given that the typical home purchase takes around three months from offer acceptance, the window to benefit from the stamp duty exemption is starting to close.

Where will the impact be greatest for first-time buyers?

Those looking to buy in pricier areas of the country will be most affected by the rule changes, according to research by Rightmove. In London, fewer than one in ten homes will be exempt from stamp duty charges if the threshold reverts back to the old £300,000 limit. Similar challenges would face first-time buyers in the South West and East of England.

Currently, 58 percent of properties in the South West are exempt for first-time buyers, a figure that could plummet to 34 percent if changes are made. The North East, however, is set to be the least affected region, with exemptions falling from 86 percent to a still substantial 74 percent.

With mounting pressure from property portals like Rightmove, calls have intensified on the new Labour administration to extend the current support for young homebuyers. Despite the industry's eagerness, Chancellor Rachel Reeves has yet to signal any commitment to such measures.

Johan Svanstrom, chief executive at Rightmove, believes the Government should not only keep the present stamp-duty thresholds but also enhance aid for first-time purchasers. He argues: "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."

Tim Bannister, a property expert at Rightmove, commented to say: "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 initiated by the previous Tory government could lead to stamp duty increases for those who already own a home but plan to move up the ladder. At present, home movers are liable for stamp duty if their new home costs more than £250,000, but this threshold for paying the tax is set to drop to £125,000 in March 2025. This would increase 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, stated: "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."