Race is on to beat stamp duty deadline
Time is running out for first-time buyers to get ahead of changes in stamp duty thresholds from April, with those who miss the deadline facing up to an extra £11,250 on their moving costs.
Under current rules, first-time buyers don’t have to pay stamp duty on the first £425,000 of the property value when buying a home costing up to £625,000. They must pay 5% stamp duty on the portion between £425,001 and £625,000. However, from April 1, first-time buyers will only escape a samp duty bill if buying a property valued up to £300,000. The 5% rate will apply to properties worth up to £500,000.
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As a result, a first-time buyer buying a property at the current limit of £625,000 will face a £11,250 hike to their stamp duty bill from April, thanks to the lowering of the thresholds.
Karen Noye, mortgage expert at Quilter: “Many first-time buyers have, in recent weeks, been scrambling to get their property sales motoring ahead of the stamp duty rules changing in April. This might bloat prices in weeks to come as people lock in deals in the hope, they can avoid higher taxes. Buyers just need to not let the tail wag the dog and end up paying over the odds for a property, ending up in a similar or worse position than if they had just bided their time and suffered a larger tax bill.
“For most, though, it is now too late, and people will struggle to get a house purchase through before the rule change. Given how much affordability is stretched for first-time buyers, this is yet another blow to those looking to get on the housing ladder”.
It’s not just first-time buyers who are affected though - home movers will also face steeper costs from April. Currently, if you’re moving home, the first £250,000 of a property purchase is free of stamp duty, and you must then pay 5% on any amount up to £925,000. However, from April only the first £125,000 of a property purchase will be stamp duty free, with a 2% rate charged from £125,000 to £250,000. This will add up to £2,500 onto home movers’ stamp duty bills.
Laura Suter, director of personal finance at AJ Bell, said: “We’ll inevitably see a flurry of people looking to lock in their home purchase before the deadline next March – with estate agents and solicitors braced for some long days ahead of the finish line. We saw a similar story when stamp duty breaks were introduced during the pandemic and then expired, with a boom in house sales ahead of the deadline. This rush to complete in time could push prices up and lead to more competition in the housing market.”
If you’re worried that you won’t beat the April deadline, don’t despair. It’s possible that once stamp duty thresholds change, property prices may cool, which would help with affordability. Homebuyers will also be helped by February’s base rate reduction, which should see mortgage rates ease, making monthly payments more manageable.
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