- Homebuyers to pay up to £2,500 more and first-time buyers up to £11,250 extra
Home buyers will pay more stamp duty from tomorrow when tax thresholds temporarily established in 2022 are lowered.
From 1 April, purchasers who aren’t first-time buyers will start paying stamp duty if the property costs more than £125,000, down from a threshold of £250,000.
On a £250,000 property purchase this will mean paying an extra £2,500 in upfront taxes.
First-time buyers will bear the brunt of the changes. They currently pay stamp duty if a home costs more than £425,000, but this will drop to £300,000 from tomorrow.
Instead of paying no stamp duty on a purchase worth £425,000, from tomorrow they will pay £6,205.
First-time buyers in London where the average property value is £564,000 will see the greatest jump in costs.
Someone buying the average home in the capital will see their stamp duty bill rise from £6,950 to £18,200 from tomorrow.
Coupled with higher mortgage rates this will add an extra financial burden for first-time buyers, who may find they have to lower their budgets to accommodate the tax.
How it will affect different buyers
Home mover purchasing a £250,000 home
Stamp duty pre-1 April: £0
Stamp duty post-1 April: £2,500
Home mover purchasing a £450,000 home
Stamp duty pre-1 April: £10,000
Stamp duty post-1 April: £12,500
Home mover purchasing a £800,000 home
Stamp duty pre-1 April: £27,500
Stamp duty post-1 April: £30,000
First-time buyer purchasing a £200,000 home
Stamp duty pre-1 April: £0
Stamp duty post-1 April: £0
First-time buyer purchasing a £425,000 home
Stamp duty pre-1 April: £0
Stamp duty post-1 April: £6,250
First-time buyer purchasing a £600,000 home
Stamp duty pre-1 April: £8,750
Stamp duty post-1 April: £20,000
Will stamp duty rise affect house prices?
Activity has accelerated in the housing market as buyers aimed to get sales completed ahead of the tax hike.
Looking ahead, some experts think the stamp duty stampede will give way to a lull.
This happened noticeably in July 2021 after the previous stamp duty holiday, which was in place during the pandemic, began to be phased out.
This resulted in average house prices falling by 4.7 per cent in one month from £242,777 to £231,386, according to Land Registry data, a dive of more than £10,000.
The stamp duty holiday was fully phased out on 30 September 2021, which resulted in another monthly fall of 2.5 per cent in October.
‘It was disappointing not to see an extension or an alternative to support first time buyers,’ said Mark Harris, chief executive of mortgage broker SPF Private Clients.
‘I suspect we will see part of the additional cost absorbed into house prices and form part of the negotiation process between vendors and buyers.
‘It has certainly been very busy over the last couple of weeks ahead of the window closing.’
Tom Bill, head of UK residential research at Knight Frank is expecting to see prices fall over the next couple of months.
‘We expect a dip in activity for a couple of months as the stamp duty clock effectively resets,’ said Bill.
‘Some buyers are put off by a stamp duty cliff edge and will start looking again once the playing field has been re-levelled.
‘When they do, they will find that supply is relatively robust and we anticipate downwards price pressure due to this imbalance but activity should recover by the end of the second quarter.’