No budget increase for first-time buyers: five months to avoid the impact of stamp duty

First-time buyers look set to pay thousands of dollars more in stamp duty after Rachel Reeves opted to avoid any budget adjustments.

It means the thresholds at which people start paying property purchase tax will return to the levels set before temporary changes were made in 2022, with first-time buyers disproportionately affected.

The price at which stamp duty starts to be charged will return to £300,000 for first-time buyers, from its current level of £425,000.

Since the end of 2022, a first-time buyer purchasing a property worth up to £425,000 has not paid any stamp duty. If your house is more expensive, you only pay tax on the part above £425,000.

However, when this limit reverts to the old £300,000 threshold from April 1, it will mean that the same £425,000 purchase will be subject to a tax bill of £6,205.

It leaves would-be first-time buyers with five months before having to shell out thousands of pounds more.

The newly listed average asking price this month rose to £371,958, according to Rightmove.

Someone buying at the average selling price can expect their stamp duty bill to increase from £0 to £3,598.

Tim Bannister, property expert at Rightmove, said: “There was no mention of maintaining current residential property thresholds for paying stamp duty, meaning we expect the typical first-time buyer to be £3,500 worse off. on April 1, according to current price estimates.

“After paying fees, conducting studies and stretching your budget with high mortgage rates, this will be an unwanted additional charge next spring.”

Rightmove says it expects to see a rush of first-time buyers, either bringing forward their plans or trying to close the deal before charges rise.

Currently, it takes an average of 152 days to complete a real estate transaction once the sale has been agreed, according to the real estate website, which would mean closing a deal tomorrow to complete it on time.

Jeremy Leaf, former residential president of Rics, says first-time buyers should press ahead and sales will take approximately four months to complete.

‘As the deadline approaches, first-time buyers should ensure they are ready to act quickly after having spoken to a mortgage broker and prepared their legal and financial representation.

“The ideal is to work on recommendations when dealing with a broker or attorney so you know you are getting someone who is efficient and will advise you correctly.”

For those who have already had an offer accepted on a property, you will not only be at the mercy of the mortgage application and the legal process.

Most first-time buyers will find themselves at the bottom of what is known as the real estate chain. This is where the person selling to them tries to buy somewhere else from another seller who will try to buy something else, and so on.

If one of these property sales fails, it jeopardizes the entire chain or at least could cause long delays in real estate transactions.

For those who have not yet found a property to buy, time is truly against you.

“It’s also important to have a good idea of ​​what type of house you want and where you want to live so you can act quickly if a suitable property comes along, as competition is likely to be fierce,” adds Leaf.

However, it also warns people not to rush into a purchase or panic buy just to avoid stamp duty.

“There’s nothing worse than buying in haste and regretting it at your leisure,” says Leaf, “so you don’t want to buy a property to save a few thousand pounds on stamp duty if it turns out you weren’t so sure.” about that first.

More than nine out of 10 households will have to pay stamp duty

From March 31, more than nine in 10 homes for sale in England will be subject to stamp duty, according to new analysis from Leeds Building Society

While first-time buyers will see the threshold for paying the tax fall from £425,000 to £300,000. For all other buyers, it will be reduced to £125,000 from the current level of £250,000.

As a result, buyers will have to pay stamp duty on 93 per cent of properties on the market in England.

Currently, buyers only pay stamp duty on 70 per cent of homes on the market.

When the threshold rises again, the amount owed on a typical home could rise from £2,169 to £4,669, based on the average price of £293,299 in the latest Halifax House Price Index.

In cheaper areas of the country, many more home buyers will have to pay the tax when they currently do not. In Yorkshire, buyers currently pay stamp duty on 49 per cent of homes currently on the market.

However, once the planned changes take effect, this figure will increase to 86 percent of county households.

Jeremy Leaf adds: ‘The loss of the stamp duty concession will be particularly felt where prices are highest in London and the South East, where they already provide a deterrent, not to mention deposit savings and higher lending criteria. strict.

“We would have preferred a reform of stamp duty, as it currently keeps homeowners in homes they don’t need or want, reduces choice and inflates the cost for those who want to buy or rent, not to mention the negative impact on employment and mobility social.

“This unpopular tax could be replaced by a fairer distribution of council tax which is currently based on values ​​that are more than 30 years old, especially on luxury homes.”