The Autumn Budget 2024, announced on 30
th October, included changes that will affect personal finances. For anyone hoping to move house in 2025, one of the key updates to be aware of is the change to Stamp Duty Land Tax thresholds which will come into effect on 31
st March 2025, so here’s everything you need to know if you’re planning to buy a new home.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is a tax levied by HM Revenue & Customs on property and land purchases in England. Stamp Duty must be paid when buying property or land over a certain price in England and is calculated as a percentage of the property purchase price. However, the rate varies depending on several factors, such as the property’s purpose and the buyer’s ownership status.
You pay the tax when you buy:
- A freehold property
- A new or existing leasehold
- A property through a buying scheme such as shared ownership
- A share in a house or when you take out a mortgage loan
So, what are the changes?
These changes will impact virtually all homeowners, including first-time buyers, home-movers and second-home buyers, because:
- For Second Homes, Buy-to-Let, and Company Purchases the SDLT surcharge for these categories will increase from 3% to 5%.
- The stamp duty threshold will drop from £250,000 to £125,000.
- First-time buyer stamp duty relief will drop from £425,000 to £300,000.
Lower Stamp Duty exemption threshold for first time buyers…
If you’re a first-time buyer currently purchasing a home, you won’t have to pay Stamp Duty on properties priced up to £425,000. This was a temporary measure that came into effect in 2022.
From the end of March 2025, however, this reverts to the previous threshold that was in effect pre-2022, of £300,000.
So, if you buy your first home after March 2025, and it costs over £300,000, you will have to pay 5% stamp duty on the portion between £300,000 and £500,000.
Let’s put that into real money for you. If you were to buy a first home that costs £425,000, currently, you would pay zero Stamp Duty, however from 1st April 2025 you will have to pay £6,250.
Anyone buying a second home has to pay an additional 5%...
Along with the changes to thresholds for first time buyers, anyone looking to buy a second home (an additional home to one you already own) will have to pay more, too.
Up until 31st October 2024, buyers of additional properties, such as second homes or investment properties, had to pay an extra 3% on top of the usual Stamp Duty rates. This has now risen to 5%, meaning if you were to buy a second property up to £250,000, you would have to pay 5%.
If your home costs between £250,001 and £925,000, you will have to pay 10% on that portion, and if it costs between £925,001 and £1.5 million, you will have to pay 15% on that portion.
How will those changes affect me?
Stamp Duty thresholds will revert to pre-2022 levels. Notably, the 0% rate will apply only to properties up to £125,000, down from the current £250,000 threshold.
Potential Impacts:
- Increased Transaction Costs: Buyers purchasing properties above £125,000 will face higher Stamp Duty costs, potentially reducing affordability and dampening demand, especially in regions with higher property values.
- Market Activity Surge Before April 2025: Anticipation of higher SDLT rates may lead to a rush of transactions before the changes take effect, followed by a potential slowdown afterwards.
The threshold for First-Time Buyer Relief will decrease from £425,000 to £300,000. Additionally, the maximum property value eligible for any relief will drop from £625,000 to £500,000.
Potential Impacts:
- Reduced Affordability for First-Time Buyers: First-time buyers purchasing properties between £300,000 and £425,000 will now incur Stamp Duty charges where previously exempt, potentially making it more challenging to get on the property ladder.
- Shift in Demand: There may be increased competition for properties priced below £300,000, potentially driving up prices in this segment.
Conclusion
This means that if you’re currently thinking of buying your first home and want to avoid the additional costs of paying Stamp Duty, you could save thousands by buying sooner rather than later.
Financial experts are also urging people to consider acting quickly. On his Budget special of The Martin Lewis Money Show, Martin said “If you’re looking to buy now, you want to get it done by next April as it’s going to get a lot more expensive.”
Are you ready to make your move now to save thousands on your dream home. If you have questions about Stamp Duty threshold changes or would like to speak to a member of our team,
please get in touch.