The increase of the stamp duty thresholds is unlikely to be extended, leaving many buyers to fork out thousands of pounds extra in moving costs.
The Chancellor will reportedly end a temporary increase of the stamp duty thresholds.
It means buyers will pay thousands of pounds extra in stamp duty once the existing thresholds revert to their previous levels at the end of March next year.
Such a move is likely to trigger a rush among buyers who want to avoid paying the additional tax.
Increased temporary stamp duty thresholds were introduced two years ago.
At their current levels, first-time buyers pay no stamp duty on properties worth up to £425,000. This will revert to £300,000 at the end of March 2025.
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On any property purchase price of up to £625,000, no stamp duty is paid on the first £425,000. This will revert to £500,000.
After this, first-time buyers pay 5% on the remaining amount, up to £200,000.
Meanwhile, there was also an increase in the threshold up to which stamp duty is paid, from £125,000 to £250,000.
‘Unwelcome’ stamp duty plans
The decision not to keep the thresholds at their current levels has been described as “unwelcome” by property experts.
Homebuyers have been hammered by high mortgage rates and soaring house prices.
Lower stamp duty rates have helped to incentivise movers – particularly first-time buyers – when perhaps everything else seems to be working against them.
Tim Bannister, Rightmove’s director of property science, explained: “The rumours that ‘nil rate’ and first-time buyer stamp duty thresholds will indeed be reverting to previous levels as of March 2025, rather than be held at their current rates, will no doubt be seen as an unwelcome additional cost by many buyers looking to make their move in 2025 – and potentially to those currently in the process.
“With the threshold for the nil rate, the rate at which no stamp duty is charged for homemovers, due to fall from £250,000 to £125,000, anyone purchasing a property over this amount could face paying up to £2,500 more in stamp duty land tax.
“Meanwhile, the threshold rate at which first-time buyers do not pay stamp duty is likely to fall from £425,000 to £300,000.
“If a first-time buyer buys a property at the average UK price of £370,759, they will pay £3,538 in stamp duty from March 2025, compared with nothing now.”
Reduction in homes exempt from stamp duty
Rightmove explained that with the current threshold of £425,000 for first-time buyers, 58% of properties are exempt from stamp duty.
If the threshold is reduced to £300,000, only 37% of homes would remain stamp duty-free, a 21% reduction.
The property website said this will particularly affect buyers in regions with higher property prices, such as London and the South East.
Bannister added: “First-time buyers are already under considerable financial pressure, with monthly mortgage payments having risen by over 60% in the past five years, adding an extra £350 per month on average.
“Although mortgage rates have eased slightly, they remain high compared to previous years, and house prices continue to increase in many areas.
“We’re likely to see a rush to complete property transactions before the stamp duty changes come into effect, as buyers look to avoid the additional costs, meaning a busier Christmas and New Year for the housing market.”
Average completion times
Rightmove explained that the average time it takes to complete a sale from the moment an offer is accepted is currently 152 days.
This is the same number of days between the Budget on 30 October, and the proposed stamp duty deadline on 31 March next year.
It means that, on average, buyers that agree to a purchase after the Budget may not complete in time unless all involved in the transaction are working together to speed up the process.
Terry Woodley, managing director of development finance at Shawbrook, said: “The Chancellor’s plans to scrap the stamp duty threshold will come as a blow to the property industry.
“First-time buyers are likely to bear the brunt of the changes. High house prices are already causing headaches for many, and increasing costs will only act as a further barrier.”
Meanwhile, Steve Griffiths, chief commercial officer at The Mortgage Lender (TML), said: “Already a much in-need cohort, not extending the increased stamp duty relief threshold will hit first-time buyers in the pockets and have further knock-on effects.
“It’s supported first-time buyer activity over the last two years, and without this additional relief, we could see fewer first-time buyers able to purchase properties, or buyers requiring larger mortgages [that] may not be available for this cohort.
“Affordability is already one of the biggest challenges in the market, and this will only exacerbate the issue.
“However, we’re hopeful that there are other plans in place that will support first-time buyers within the Budget that will balance this decision and continue to support homeownership in the UK.”
