Do first time buyers pay stamp duty - what do next year's changes mean?

Words by Jennifer Harrison , Content Lead

This article first appeared on our blog

Exactly how much stamp duty you need to pay will depend on how much the property you’re buying is worth, but with just months left on the current stamp duty relief, buyers will need to act quickly to take advantage of the higher thresholds.

What is stamp duty?

Stamp duty land tax (SDLT) is the tax you must pay to the government whenever you buy property in the UK. The amount can vary depending on whether you’re a first-time buyer, how much the property costs, and whether or not it is the only residential property you’ll own.

In England, currently, if you are purchasing a property that will be the main/only residential property you own and you are not a First Time Buyer (FTB), you will pay the following rates for stamp duty:

• No stamp duty on the first £250,000

• 5% on the portion worth £250,0001 to £925,000

• 10% on the portion worth £925,001 to £1,500,000

• 12% on the portion above £1,500,000

The rates are different if you own other property (ies) that aren’t your main residence, for example a Buy to let or holiday home, where you will pay an additional 3% stamp duty on top of these rates. It is also different for FTB’s where a lower rates of Stamp duty apply as follows;- :

• No stamp duty on the first £425,000

• 5% on the portion worth £425, 001 to £625,000

If you’re purchasing your first home and it’s worth more than £625,000 you are no longer eligible for the FTB relief and you pay stamp duty at full rate as if you were a normal homemover/2nd time buyer.

Unfortunately, currently stamp rates for FTBs are set to increase from 1st April 2025 back to their previous level in 2022 having been temporarily lowered by the Conservatives

What will stamp duty look like from April 2025?

For home movers, the only change to stamp duty is that, instead of paying no duty on homes valued up to £250,000, they will now be taxed 2% on any property value between £125,000 - £250,000.

The stamp duty thresholds will be lowered for FTB’s. We’ve pulled together this table so you can see what the changes to the stamp duty thresholds will look like:

Many had hoped that the higher thresholds introduced by Truss two years ago would be extended, but when current Chancellor, Rachel Reeves, delivered her budget several weeks ago, unfortunately no such announcement was made.

What impact will this have on first time buyers?

The reduction to the thresholds means more properties will now be eligible for stamp duty, increasing the financial burden that comes with buying your first home for many. The Government’s house prince index (as of Aug 2024) shows that the average price for a home in London is £531,000 meaning, even with the current thresholds, there would still be some stamp duty to pay for most first-time buyers in this area. Currently 30% of FTB’s in London pay £500,000 or more for a property in London, so the change is likely to impact significant numbers of buyers in the capital

With properties in the South West of England costing an average price of £321,000 and those in the South East costing £385,000, many potential homeowners in these regions will have to factor in the additional costs of stamp duty once we reach April. Whether or not this will have an impact on the housing market remains to be seen. Some speculate that we may now see a surge in activity as first-time buyers try to take advantage of the lower rates, whereas many will argue that the impact will be lessened as high interest rates are still putting off many would-be buyers.

What should I do if I want to buy my first home?

If you’re a first-time buyer who wants to purchase a property soon, you should consider the financial impact of purchasing your property on or before 31st March 2025 compared to after, as you could save yourself thousands of pounds. It is important to remember that the entire mortgage process can take between two and six months to complete. Whilst you should never rush any major financial decisions, acting quickly could mean you’re able to benefit from the current rates of stamp duty. At MPowered Mortgages we’re currently processing mortgage applications to offer within a day and so are well-placed to help any buyers needing their mortgage decision quickly. We always recommend speaking to a mortgage advisor to establish what is best for you and your circumstances, as they’ll be best placed to guide you in the direction of the mortgage deal that addresses your needs.

All information contained on this blog is for general information use only. It does not provide mortgage advice and should not be construed as being mortgage advice, which can be provided by your mortgage broker and advisor only.