With stamp duty thresholds set to revert to previous levels from April 2025, there are only a few months left to take advantage of the current rates, and it could cause a spike in sales.
It was in 2022, during the now-infamous ‘mini Budget’ delivered by then-Chancellor Kwasi Kwarteng, that stamp duty thresholds on residential property were raised to their current levels. It meant that, for a huge number of buyers, the tax bill dropped as the nil rate band (when you start paying SDLT) rose from £125,000 to £250,000.
This was meant to be a permanent measure to more fairly reflect house prices, which have risen significantly since the original threshold was introduced. However, incoming Chancellor Jeremy Hunt later announced that it would only be temporary – until April 2025 – after which point the previous thresholds would apply.
Many had hoped that the latest Budget from Rachel Reeves would see the current rates and thresholds be kept as they are. After all, the average UK property price, according to the latest figures from Zoopla, is now £267,500, with extremely few properties falling below the £125,000 threshold. It means a much larger proportion of people will need to pay stamp duty from next year.
Completing your property purchase on or before 31st March could therefore save you several thousand pounds – particularly if you are making a high-value purchase, or if you are buying an additional home or property investment, which is now subject to an additional 5% stamp duty surcharge (up from 3% prior to the Budget).
How are stamp duty rates changing?
If you’re buying a residential property as your main residence, and you’re a UK resident, the current stamp duty rates and thresholds are as follows:
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £250,000 | Zero |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
So if you’re buying a property for £295,000, your bill is calculated as follows:
- 0% on the first £250,000 = £0
- 5% on the final £45,000 = £2,250
- total SDLT = £2,250
For additional homes or property investments, a further 5% is added to this.
But from 1st April next year, the rates will go back to their previous levels before the change in 2022, which are as follows:
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
This means that, on the same property, your stamp duty bill will rise to £4,750, which is more than double its current level.
Different rules apply to first-time buyers, whose nil rate band is set at £425,000, so only homes purchased above this price will generate the tax bill. For values between £425,001 and £625,000, the rate is 5%, while for homes above £625,000, you cannot claim first-time buyer relief.
From 1st April 2025, the nil rate band will revert back to £300,000, with 5% tax due on the portion between £300,001 and £500,000 if the value falls within these amounts. Any first-time buyer purchases above this price will not be able to claim the relief.
How it could affect house prices
Whenever a surge in housing market activity takes place, this tends to have a knock-on effect on prices, pushing them upwards as demand outweighs supply. During the post-Covid stamp duty holiday, this is exactly what happened, causing a major spike in prices followed by a market correction or levelling off period when things returned to ‘normal’.
Therefore, now that the Budget has highlighted the fact that stamp duty rates are set to change, many prospective buyers are likely to try and complete their purchases ahead of this, while those who had been undecided on whether to make a purchase or investment might be more likely to push ahead now.
While those who do get ahead of the upcoming changes could save money on their tax bill, securing a deal on a property ahead of a house price surge can also be extremely beneficial and lead to greater savings.
Commenting on the latest report released by the Royal Institute for Chartered Surveyors (Rics), which revealed a boost in housing market activity in October, Tina Paillet, president of Rics, said: “The pending expiration in the higher stamp duty threshold in spring 2025 may cause homeowners and first-time buyers to rush to take advantage of the current rate, but this will likely be followed by a weaker trend after the deadline has passed.”
Rightmove’s Tim Bannister echoed the prediction last month, saying: “The rumours that ‘nil rate’ and first-time buyer stamp duty thresholds will indeed be reverting to previous levels as of March 2025, rather than be held at their current rates, will no doubt be seen as an unwelcome additional cost by many buyers looking to make their move in 2025 – and potentially to those currently in the process.
“With the threshold for the nil rate, the rate at which no stamp duty is charged for home-movers, due to fall from £250,000 to £125,000, anyone purchasing a property over this amount could face paying up to £2,500 more in stamp duty land tax.”
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