Homebuyers face “challenging” times ahead as tax bill set to rise £6,250 overnight.
From April 1, 2025, the current stamp duty threshold of £425,000 for first-time buyers will drop to £300,000, potentially forcing many new homeowners to pay the tax for the first time.
The maximum purchase price eligible for first-time buyers’ relief will also decrease from £625,000 to £500,000, creating additional pressure for those in higher-priced areas.
Amanda Bryden, head of mortgages at Halifax, said the upcoming changes have given prospective first-time buyers more motivation to get on the housing ladder and bring any home-buying plans forward before the April deadline.
The changes will affect buyers in England and Northern Ireland, where stamp duty applies.
House prices saw a slight decline of 0.2 per cent in December 2024, breaking a five-month streak of consecutive increases, according to Halifax.
House prices saw a slight decline of 0.2 per cent in December 2024
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Despite the monthly dip, the average UK house price stood at £297,166, representing a 3.3 per cent increase compared to the previous year.
Matt Thompson, head of sales at London-based estate agent Chestertons, reported that “December 2024 was one of the busiest Decembers in years in terms of buyer demand.”
The surge was driven by both first-time buyers rushing to beat stamp duty changes and second-steppers looking to upsize.
For home movers, the stamp duty threshold will halve from £250,000 to £125,000, making property transactions more expensive across the board.
Buyers who previously paid no stamp duty now facing payments of up to £6,250 on properties above the new threshold overnight.
Karen Noye, mortgage expert at Quilter, warns that additional affordability pressures on first-time buyers could have wider implications for the market.
She said: “This will no doubt make taking the first step onto the property ladder even more challenging, particularly for those living in areas of the country with higher average house prices.
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“First-time buyers are a critical element of the housing market but piling on additional affordability pressures, at a time when purchasing a first home is already extremely difficult, means we could see a reduction in such purchases.
“This would not only be disappointing news for those who had hoped to take that first step, but it would also likely ripple across the market and we could see a ‘gluing up’ effect if chains stall and transactions slow as a result.”
The impact would be particularly significant in areas with higher average house prices, where first-time buyers already face considerable challenges.
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment service said: “This will deliver a particularly heavy hit to first-time buyers, the next generation of property purchasers, who will not only need to raise enough money for a deposit but also enough to cover the higher tax bill.
“As a result, property prices may rise in the run-up to the deadline as buyers and sellers race to beat the tax hike.
“Beyond the start of April, house price growth may be more subdued if buyers pivot towards cheaper homes to reduce their tax bill or negotiate more aggressively to ensure their desired property remains affordable.”
