It’s no laughing matter. From April Fool’s Day 2025 first time buyers will face up to £11,000 more in Stamp Duty Land Tax. If you want to get on or up the ladder, don’t delay, it could cost you thousands.
What is Stamp Duty
Stamp Duty Land Tax is the tax paid when buying a property in England and Northern Ireland. Currently first time buyers receive a generous discount, with a 5% tax only payable on the proportion of the property costing more than £425,000 (providing the entire property costs less than £625,000). This contrast with those moving up the ladder, who pay 5% on the proportion of the property’s price between £250,000-£925,000 and higher tax rates above this . As a result, Zoopla estimates that up to 80% of first time buyers don’t pay any Stamp Duty tax at all, while 14% only pay part of the tax.
Next year will be more expensive
Next year will be different. From 1st April onwards, nine out of ten homes will incur Stamp Duty according to Leeds Building Society. And first time buyers will be the hardest hit as both the price of eligible houses for a first time buyer’s discount will fall from £625,000 to £500,000 and the threshold at which the 5% tax kicks will fall from £425,000 to £300,000.
This double whammy of changes will have a meaningful impact on the cost of buying a first home. For example, a £350,000 property will go from generating no stamp duty tax, to creating a £2500 tax bill, while a £500,000 property will see its stamp duty rise from £3750 to £10,000. And should a first time buyer be lucky enough to scrape together more than £500,000 for their first home, they will no longer benefit from the relief at all. This means on a currently eligible £625k home the stamp duty will soar from £10,000 to over £21,000.
More expensive for climbers too
Existing home owners wanting to move will have to find up to another £2500 as a result of the reintroduction of the 2% tax on a property’s value between £125,000 and £250,000 where currently no tax is payable. Above this tax rates remain the same.
Don’t be average
If you want to get the keys to your new home before these changes kick in, you need to get moving. Rightmove reports that it takes 150 day (21.5 weeks), on average, from offer to completion. If you want to avoid forking out thousands in additional tax you need to be quicker than average in your house purchase.
Get your finances in order
First, make sure you have your finances in order, including your mortgage agreed in principle before offering on a property. With the clock ticking, it is worth discussing your timeline with a mortgage broker as, on this occasion, it may be cheaper overall to take a mortgage from an institution with a quick turnaround (and swerve the Stamp Duty increase) than opting for the one with the lowest rate.
Don’t hesitate with conveyancing
Second, instruct your conveyancer early and regularly and be prompt in your responses. Conveyancing can’t begin until anti-money laundering checks are completed, so do this while house hunting. Once your offer is accepted, instruct your conveyancer to order the local searches asap. The government’s target is a 10 day turnaround, but they can take much longer. You can look up your local authority here (Personal Search: Turnaround Times – SearchFlow).
Next, are the enquiries (questions between buyer and seller). These can drag on so make sure you reply promptly. It may be worth considering appointing the same conveyancer as your seller/buyer to aid communication or perhaps use an online portal where you can respond 24/7. If time is really tight, discuss indemnity insurance policies (for searches and/or enquiries) with your solicitor too.
Buy New Build
Buying a chain free home removes a big headache. And can drastically reduce completion time.
New build can save money. There are often sales discounts to help with the buyers deposit and other promotions to take advantage of such as furniture packs, or if you are sensible and buy off plan, a wonderful array of choices of interior kitchen styles and colours, carpet and floor shades, tiles and handles. So you can create an interior to suit your style.
Buying a home is a big decision. It isn’t one to be taken solely because of the upcoming Stamp Duty changes. But, if you are in the process of buying or want to buy soon, you need to be quick and nimble to avoid a costly April Fool’s Day.
