Budget change could see house buyers hit with extra £2,500 bill

The move is expected to add £2,500 - and potentially much more - to the cost of buying a property based on the average sale price for England at £300,830.

A scheme that reduced the cost of stamp duty on home purchases is anticipated to be scrapped by the Chancellor in the Budget. This move could add an extra £2,500 or more to the cost of buying a property, based on the average sale price for England at £300,830.

The changes are expected to particularly impact first-time buyers and those in the south of England, with around 309,000 additional purchases a year becoming subject to the tax. In 2022, the Liz Truss government temporarily raised the house price thresholds at which stamp duty is paid from £300,000 to £425,000, aiming to assist people onto the property ladder.

However, Rachel Reeves is predicted to lower the stamp duty threshold back to £300,000 from April 2025, meaning thousands of buyers will now have to pay the property tax. Concurrently, a stamp duty dispensation scheme aiding first-time buyers purchasing homes worth between £425,000 and £625,000 is likely to be scaled back.

These moves, set to be announced in the Budget, are predicted to spark a rush in property sales over the coming months and into the New Year as buyers attempt to avoid it. Industry experts forecast that the number of first-time buyers paying stamp duty will triple from 8 percent to 26 percent when the threshold returns to £300,000. In London, where property prices are significantly higher, the proportion paying stamp duty will rise to 71 percent.

From April 2025, the expected stamp duty rates will be zero for homes up to £125,000; 2 percent for those between £125,001 and £250,000; 5 percent for properties ranging from £250,001 to £925,000; 10 percent for homes priced at £925,001 to £1.5 million; and 12 percent for those over £1.5 million. For first-time buyers, the rates would be zero on properties up to £300,000 and 5 percent on those between £300,000 and £500,000.

This means a first-time buyer of a £400,000 property in England would face a stamp duty bill of £5,000, up from zero today. Reverting stamp duty to pre-2022 levels could generate an annual £1.8 billion for the Treasury by 2029-30. Despite warnings from property experts and economists not to reverse the stamp duty cuts made by Liz Truss's government, it appears that these concerns have been ignored. Adam Corlett, principal economist at the Resolution Foundation, commented: "The chancellor will need to announce significant tax rises in her upcoming budget, but there is one tax cut she should announce too — making permanent the increased threshold for paying stamp duty."

He added, "This measure is due to expire next April, and will cost movers up to £2,500. Stamp duty is a fundamentally bad tax that restricts people’s ability to move, and there are plenty of other places where Rachel Reeves can look for tax revenue."

A spokesperson for Zoopla, the property sales portal, stated: "Thousands of first-time buyers have benefitted from the relief in stamp duty introduced in 2022."

They further advised: "Those looking to purchase their first home should act this Autumn if they are to avoid paying more in stamp duty, particularly if they are looking to purchase a home in Southern England, an area where first-time buyers are likely to see a sizable increase in stamp duty once the changes come into effect next April."

The spokesperson also added: "Those not looking to purchase until after 1st April, should make sure they build the additional stamp duty fees into their plans and account for it in their overall budgets."