Stamp duty pain for homebuyers with no reprieve on looming tax hike

There will be no stamp duty reprieve for homebuyers after Rachel Reeves made no reference of it during today’s Spring Statement.

It means from 1 April, homebuyers across England and Northern Ireland will pay more upfront tax when buying a property with thousands racing to try to complete before the new rates kick in.

It is thought as many as 70,000 buyers will miss the deadline and pay more tax. 

From next Tuesday, the nil-rate threshold, under which no stamp duty is paid, will drop from £250,000 to £125,000, returning to where it was before temporary changes were made in 2022. 

This will increase the tax bill on the average-priced home in England from £2,028 to £4,528, according to analysis by Coventry Building Society.

First-time buyers will see their nil-rate band threshold drop from £425,000 to £300,000.

This means instead of paying no stamp duty on a purchase worth £425,000, from April they will pay £6,205. 

On a £500,000 purchase their tax bill will rise from £3,750 to £10,000 – a bump of £6,250.

Matt Thompson, head of sales at Chestertons, said: ‘We have met a lot of first-time buyers who held out hope for the Chancellor to make a u-turn on stamp duty thresholds in today’s Spring Forecast. 

‘As this hasn’t been the case, first-time buyers will now have to ensure that their budget can cover the cost increase which means some might compromise on location or type of property. 

‘Although the rush of first-time buyers that the market has seen earlier this year has slowed down, demand remains strong as mortgage rates are still attractive enough to motivate buyers to get on the property ladder.’

Jeremy Leaf, north London estate agent and a former Rics residential chairman thinks an extension should have been granted to those buyers currently going through the legal process.

It was reported earlier this month that around 575,000 home moves were stuck in a ‘log jam’ in the conveyancing process ahead of the stamp duty changes.

More than 70,000 homebuyers across England are predicted to narrowly miss the stamp duty deadline and complete in April, according to Rightmove.

‘It seems a little unfair on those who have moved heaven and earth to take advantage of the stamp duty concession before it disappears but who may not make it, through no fault of their own,’ said Leaf.

‘The deadline could perhaps have been extended for those transactions in solicitors’ hands from the beginning of February as a small respite.’

Will property prices slide after stamp duty hit?

When stamp duty increases there is typically somewhat of an ensuing hangover when it comes to house prices.

This is because there is often a mad rush in the run up to the deadline followed by a lull in the immediate aftermath.

This happened noticeably in July 2021 after the stamp duty holiday began being 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.

House prices across the UK rose by the largest level recorded since January 2023 according to ONS data released today.

Jonathan Handford, managing director of national estate agent Fine & Country

The average home rose in value by 4.9 per cent in the 12 months to January and is now fetching £269,000.

Jonathan Handford, managing director at national estate agent group Fine & Country says this has partly been fuelled by desperation among buyers to complete before the deadline.

He suggests we could now see price rises slow and potentially even dip slightly. 

‘As the April tax changes draw closer, the window of opportunity for buyers will continue to narrow,’ said Handford.

‘The real test for the market will come after these changes take effect, potentially leading to a slowdown or stabilisation in demand — and, in turn, prices. 

‘While this could mark a cooling-off period, it may also bring much-needed stability, particularly for first-time buyers who have struggled with soaring prices and intense competition.’