First-time buyers have eight months to avoid stamp duty changes or pay thousands more

First-time buyers have eight months to take advantage of current stamp duty rules on property transactions and save thousands of pounds on their home purchase.

Currently, a first-time buyer does not pay stamp duty when purchasing a home up to £425,000. If your home is more expensive, you only pay stamp duty on the portion above £425,000.

However, this limit, which remains at its current level from 2022, will return to the old threshold of £300,000 from April 2025.

When the thresholds change, a first-time buyer purchasing a £425,000 home will go from paying nothing to shelling out £6,250 in stamp duty.

Since the typical home purchase takes about three months after an offer is accepted, those who want to avoid the tax should start planning as soon as possible.

> Check how much you will pay with our stamp duty calculator

The average house price is around £285,000, Office for National Statistics figures show, with around a third of first-time buyers purchasing properties worth more than £300,000, according to independent research by UK Finance.

Only 37 per cent of homes for sale in England will be stamp duty free for first-time buyers in England when existing thresholds re-apply next April, according to Rightmove, up from 58 per cent currently.

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Where will first-time buyers be most affected?

Based on the average sale price of £373,493, a typical first-time buyer can expect to pay £3,675 in stamp duty in 2025, compared to nothing today.

Many homes sell for less than their asking price, so the actual figure may be slightly lower, but regardless, many more homes will be caught in the stamp duty net.

This will compound the pain caused by higher mortgage rates, which are already putting pressure on the budgets of first-time homebuyers and affecting how much they can borrow.

Someone trying to buy in more expensive parts of the country will be the hardest hit when the rules change.

In London, fewer than one in ten homes will be exempt from paying stamp duty for first-time buyers by April 2025 if the old thresholds are reinstated, according to Rightmove, compared with a quarter at present.

The south-west and east of England would also be severely affected by the change.

In the South West, 58 per cent of homes are currently exempt from paying stamp duty for first-time buyers. This figure will fall to just 34 per cent of homes from April.

However, the north-east of England is expected to be the least affected. Currently, 86 per cent of homes there are exempt from paying stamp duty for first-time buyers. Next year, that figure will fall to 74 per cent.

You can check how much stamp duty you will currently pay with our stamp duty calculator, but in general, first-time buyers pay nothing on the share up to £425,000, and 5 per cent on the share between £425,001 and £625,000.

Those who pay more than that cannot claim relief and are subject to the same rules as non-first-time buyers.

The chart below shows the number of homes in each region that will not incur stamp duty for a first-time buyer, assuming the threshold returns to £300,000.

Will the government change stamp duty rules?

So far, the Labour government has not committed to extending the current stamp duty thresholds beyond the end of March next year.

But as well as Labour’s ambitious target of building 1.5 million homes over the next five years, along with its intention to reform the planning system, it also says it wants to put more properties into the hands of first-time buyers.

The government’s new plans are expected to maintain the current mortgage guarantee system, designed to encourage banks to lend to people with only a small deposit.

Labour is also planning to give local residents priority in new developments, ending what it calls “the farce of entire developments sold to international investors” before local residents can access them.

Lofty ambitions: Labour pledges to build 1.5 million homes over next five years – but what other help will it offer first-time homebuyers?

Johan Svanstrom, chief executive of Rightmove, believes the Government should also consider maintaining existing stamp duty thresholds and providing additional help for first-time home buyers.

“We welcome the new Government’s significant ambitions to increase housing supply,” Svanstrom said.

“It should consider adopting consumer support measures, maintaining the current stamp duty exemption threshold for first-time buyers of £425,000 in England, and looking at solutions to help first-time buyers not only with the deposit but also with the ability to borrow enough from a lender. Mobility and housing are an important driver of growth for the wider economy.”

Tim Bannister, property expert at Rightmove, added: ‘The property market is made up of many connected pieces – as owning your first home becomes more difficult, some people are renting for longer, putting additional pressure on the rental sector.

‘Stamp duty is a barrier to movement, and maintaining the current thresholds seems a logical step to provide some support to first-time homebuyers.’

What about moving?

As well as first-time buyers, home-movers will also lose out next April when thresholds return to their original level.

Currently, home-movers pay stamp duty if their home costs more than £250,000, but in March 2025 this amount will be reduced to £125,000, raising 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, said: ‘So far the new Government has been fairly silent on stamp duty, but silence is definitely not golden when it could end up costing home buyers thousands of pounds in extra tax.

‘If we don’t hear anything between now and next April, those looking to buy a mid-priced home will have to shell out an extra £2,500 in property tax.

‘The next Budget could be presented 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 about buying or selling a home.

‘There are just eight months until temporary property tax thresholds are halved to just £125,000, leaving all but a few buyers facing higher tax bills up front. That April deadline carries a risk of distortion of the housing market.

‘In the coming months, shoppers will increasingly be likely to rush into purchases to avoid a sharp tax increase, leading to a flurry of activity followed by a sharp drop once the relief ends.

“This wave and bust effect is not going to help create long-term stability in the market, so stamp duty should be high on the Chancellor’s agenda when preparing the next Budget.”