UK households will wake up to £11,250 bill after stamp duty rule change

UK households buying their next home have been warned a tax bill could hit £11,250 as a stamp duty deadline looms.Homebuyers are being warned costs are set to jump by thousands of pounds when the tax cut ends after the Labour Party Budget.

From April 1, the property limit for stamp duty reduction will be lowered to £500,000, with only the first £300,000 tax-free. The change means a first-time buyer purchasing a £625,000 home will no longer be eligible for the tax break, resulting in an £11,250 increase in their stamp duty bill.

Laura Suter, director of personal finance at AJ Bell, warns: "First-time buyers will be hit the hardest as they see their tax-free band dramatically reduced. At the same time, those buying a more expensive first home will no longer be eligible for the stamp duty break."

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Ms Suter continued, as she spoke out 24 hours after the Labour Party Budget: "Well inevitably see a flurry of people looking to lock in their home purchase before the deadline next March with estate agents and solicitors braced for some long days ahead of the finish line."

Ms Suter said: "We saw a similar story when stamp duty breaks were introduced during the pandemic and then expired, with a boom in house sales ahead of the deadline." First-time buyers buying a £625,000 home will pay £11,250 more in tax with home movers paying up to £2,500 extra in tax.

This may see a stampede to buy properties before rates rise which could distort market, it is feared. Ms Suter said in her response: “This rush to complete in time could push prices up and lead to more competition in the housing market.”

Rachael Griffin, tax and financial planning expert at Quilter said: “News that the stamp duty rate for second homes will increase to 5% effective tomorrow will further hit the buy-to-let sector. This hike, payable by buyers in England and Northern Ireland, adds a significant cost for those looking to purchase additional properties, including buy-to-let and holiday homes.

"By raising the upfront expense, Labour aims to discourage investment in second homes, hoping to ease some of the demand pressures that have contributed to higher property prices in popular areas."