The UK government has confirmed that the temporary stamp duty land tax (SDLT) reductions will end on 31 March 2025. Originally introduced to stimulate home buying, these discounts have been crucial for first-time buyers, who will now face higher transaction costs.
Current Stamp Duty Relief Explained
Since September 2022, first-time buyers could buy homes up to £625,000 with substantial tax savings: no stamp duty on the first £425,000 and 5% on amounts above that, up to £625,000. This policy has remained unchanged under Chancellor Jeremy Hunt.
Changes Coming After 31 March 2025
From 1 April 2025, the property price limit for stamp duty discounts will reduce to £500,000, with only the first £300,000 exempt and 5% applied to the remaining value. For other buyers, the current £250,000 exemption will revert to £125,000, with a 2% rate on values between £125,000 and £250,000. This will significantly raise costs, particularly for first-time buyers, some of whom may be priced out of the market.
Impact on First-Time Buyers and the Property Market
Ending these reductions is expected to increase financial pressure on first-time buyers. Laura Suter of AJ Bell estimates an extra £11,250 stamp duty cost on a £625,000 property. A rush of buyers may enter the market before the deadline, possibly raising competition, property prices, and pressure on estate agents and solicitors.
Budget Red Book: Future SDLT Rates
After March 2025, SDLT rates will be fixed as follows:
- 0% on properties up to £125,000
- 2% on values between £125,000 and £250,000
- 5% up to £925,000
- 10% up to £1.5 million
- 12% on properties above £1.5 million
Concerns and Industry Criticism
The rollback of SDLT relief has raised concerns that it could slow market activity, especially for first-time buyers already stretched by high prices and borrowing costs. A slowdown in the property market could also impact the wider economy, affecting industries like construction and local services.
Preparing for the Impact
With under two years until the SDLT relief ends, buyers should consider accelerating their plans to benefit from current savings. Estate agents and legal professionals also anticipate a pre-deadline rush, which could lead to delays and higher property prices.
FAQs
- What is the current SDLT relief for first-time buyers?
First-time buyers pay no SDLT on the first £425,000 of a property up to £625,000, with 5% on the value between £425,000 and £625,000. This expires on 31 March 2025. - How will SDLT change after 31 March 2025?
From 1 April 2025, the exemption for first-time buyers will apply to the first £300,000 of properties up to £500,000, with 5% on any remaining value. Other buyers’ exemptions will revert to £125,000. - Why is the government ending the SDLT reductions?
The reductions were introduced to stimulate the market post-pandemic. The government cites fiscal sustainability as a reason for allowing them to expire. - What impact will this have on homebuyers?
It will increase property purchasing costs, particularly for first-time buyers. For example, buying a £625,000 property will incur an extra £11,250 in SDLT. - Will there be a rush to buy before the deadline?
Likely, as buyers try to take advantage of the current SDLT relief, which may temporarily drive up prices and market competition. - What are the fixed SDLT rates post-2025?
Rates will be set at 0% up to £125,000, 2% on values between £125,000 and £250,000, 5% up to £925,000, 10% up to £1.5 million, and 12% above £1.5 million.
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