Stamp duty warning as buyers rush to beat hike in property tax | Personal Finance | Finance

Home buyers are rushing to complete property sales ahead of a hike in stamp duty due from April 1. The move comes after the Chancellor, Rachel Reeves, decided not to extend a stamp duty holiday introduced by the last Conservative government.

The net effect of the change will be to add thousands of pounds to the cost of completing a purchase, which will hit first time buyers particularly hard. Sales of property agreed over the last four weeks were up 19 percent compared to the same period in 2023, with buyer demand 25 percent higher, according to property portal Zoopla.

And this surge is predicted to continue through to the early weeks of the new year.

Such is the pressure to buy now that some property experts believe buyers will risk paying over the odds simply to agree and complete a purchase ahead of the rise in stamp duty.

The changes mean:

• The nil rate threshold for paying stamp duty which is currently £250,000 will return to the previous level of £125,000
• The nil rate threshold for first-time buyers which is currently £425,000 will return to the previous level of £300,000
• The maximum purchase price for which First-Time Buyers Relief (a reduced stamp duty rate) can be claimed is currently £625,000 and will return to the previous level of £500,000.

The net effect of the changes means that, for example, a first-time buyer purchasing a property at £425,000 who currently pays no stamp duty will be charged £6,250 from April 1, 2025. The bill will be higher still in those parts of the country where average house prices are higher and it is these areas which are seeing a surge in young people trying to push

First-time buyers in London hoping to purchase an average priced house at £531,212 are set to be worst affected. They will have to find an additional £11,250 when the changes take effect.

Matt Thompson, head of sales at estate agency Chestertons, said: “We are seeing more buyers entering the market which is not typical for this time of year… one reason for this is the change to stamp duty. This is driving first-time buyers to get on the property ladder before that deadline.”

But rushing to complete a property purchase when conditions are sub-optimal can prove costly, agents and mortgage brokers have warned. A first-time buyer of a £500,000 home will pay an additional £6,250 in stamp duty from April. But overpaying by even 2 percent in a rush to beat the deadline would see them spend £10,000 more.

Jessica Sully, of Kingston-based estate agent Carringtons, told the Telegraph: “The message to first-time buyers is don’t put yourself under too much pressure to secure a property before the stamp duty changes at the end of March 2025.
“With lower stock levels and rising demand, sellers have the upper hand. Typically, we see more properties come to market at the start of January and with an increase in stock there will be more choice and control.

“Be wary of bidding wars and paying over the odds for a property in a panic as this will negate any savings you think you’ll be making prior to the stamp duty increase.”

Charlie Lamdin, who runs estate agent network Best Agent, said: “There’s always a rush to beat a stamp duty increase deadline. Unsurprisingly, people are happier pouring money into property than giving it to HMRC, especially as they can borrow money for the property, but not for stamp duty.

“This makes sense up to a point, but when buyers become fixated on it, it can and does result in buyers overpaying for a home.”

He added: “In the flurry of a bidding war on a property, people can get carried away, not only because they want to win the bidding to beat the deadline, but also because they want to avoid going back to square one and having to start all over again looking for another home. It is very time-consuming.

“First-time buyers with large loan-to-value mortgages need to be extremely careful, as they are the ones most likely to end up overpaying in this scenario. House prices don’t always go up, and you can very quickly find yourself in negative equity, stuck with a home you can’t sell when you need to move.”

David Hollingworth, of broker L&C Mortgages, added: “It’s important that buyers remain clear-eyed about making the right offer on the right property. That means remaining focused on finding a property that will suit your requirements and is at the right price.

“Keep things in perspective. There may be a lull after the [stamp duty] deadline passes as buyers bring their plans forward, which could allow for more negotiation in the aftermath. If mortgage rates fall, there could still be benefits, even though no one wants to pay more stamp duty than they have to.”