For many people buying a home, it will be more expensive come next April, but why is this?
Stamp Duty Additional Surcharge
In the Autumn Budget, it was announced that the Stamp Duty surcharge for those buying additional properties would be increased from 3% to 5%. This surcharge is paid on top of the normal Stamp Duty thresholds.
Additionally though, the Stamp Duty thresholds are to be cut on 1st April 2025 in England and Northern Ireland.
Changes for those NOT Buying their First Home
Currently, those who are not buying their first home don’t pay Stamp Duty on the first £250,000 of the property they buy. So, if buying a property that is less than this amount, you don’t pay any Stamp Duty at all.
From 1st April this threshold will drop down to £125,000, so the first £125,000 of your property is tax free, you then will pay 2% up to £250,000. Other than this, the rest of the thresholds remain the same, with you paying 5% on the portion between £250,001 to £925,000, 10% on the portion between £925,001 and £1.5 million, and 12% on anything over £1.5 million.
What this reduction of the first threshold means is that you will be paying more tax when buying a home (if it costs over £125,000). Those buying properties worth less than £250,000 but more than £125,000 will now be paying Stamp Duty where they would not have done previously, and every person buying a property costing more than this will also see a higher Stamp Duty bill.
Changes for those Buying their First Home
For first-time buyers, you currently don’t pay Stamp Duty on the first £425,000, as this is intended to help people get on the property ladder. You then pay 5% on the amount between £425,001 and £625,000. If you buy a property over £625,000, you can no longer claim first-time buyer relief and must follow the rates of those who have bought a home before.
From the 1st April 2025, these rates will change, with the initial tax-free threshold being brought down from £425,000 to £300,000. You will then pay 5% on the amount between £300,001 and £500,000. If you buy a property worth over £500,000 you will no longer have first-time buyer relief.
Examples of What this Could Cost You
Martin Lewis recently gave some helpful examples on what these changes could look like in monetary terms:
Non-first time buyers buying a property over £250,000 will pay an additional £2,5000 in Stamp Duty.
A first time buyer purchasing a property of £425,000 will pay an extra £6,250 of Stamp Duty.
A first-time buyer purchasing a property of £625,000 will pay an additional £11,250 in Stamp Duty.