Pressing stamp duty deadlines persistently hamper property value increase
The upcoming changes to stamp duty in 2025 are set to have a significant impact on first-time buyers and the broader housing market in the UK.
### For First-Time Buyers:
From 1 April 2025, the stamp duty discount for first-time buyers will be reduced. They will pay no stamp duty on properties up to £300,000, 5% on the portion between £300,001 and £500,000, and no relief on properties over £500,000. This contrasts with previous thresholds, where first-time buyers were exempt up to £425,000 or £500,000 depending on the scheme. As a result, first-time buyers face higher upfront costs if purchasing properties between £300,000 and £500,000 and will lose relief on more expensive homes.
### For the Housing Market:
The nil-rate threshold for stamp duty was lowered to £125,000 from £250,000 starting 1 April 2025, affecting all buyers except first-time buyers on properties under £300,000. This has led to a sharp increase in SDLT revenue—a 25% rise in stamp duty paid from January to May 2025 compared to the previous year (from £4.4 billion to £5.5 billion), and a 20% year-on-year increase overall for the past 12 months (£14.1 billion). The increased stamp duty costs have raised the average tax bill by more than four times, e.g., from £774 to £3,274 on an average-priced property, increasing the financial burden on buyers.
There was an initial spike in transactions before April 2025 to avoid higher fees, followed by a slowdown just after the threshold change in May, indicating short-term market disturbance and reduced buyer activity. Despite this disruption, the housing market showed signs of resilience and regional growth post-dip, with house prices stabilizing after an April decline driven by the front-loading of purchases before the change.
### Summary Table of SDLT Impact on Different Buyer Types (from April 2025)
| Buyer Type | Stamp Duty Threshold | Key Changes | |---------------------|----------------------|------------------------------------------------| | First-Time Buyers | £300,000 nil rate | Pay 5% between £300,001-£500,000, no relief >£500,000 | | Main Residence Buyers| £125,000 nil rate | Full SDLT liability from £125,001 upwards | | Investors | £125,000 nil rate + higher rates | Increased SDLT liability, e.g., £15,000 on £250,000 property |
These changes mean higher costs for most buyers, particularly for first-time buyers in the £300k–£500k range, potentially reducing their ability to enter the market. For the market as a whole, higher transaction costs may reduce moving activity and dampen demand, at least short-term, but the market shows some resilience despite these headwinds.
As we move towards 2025, it remains to be seen how the housing market will adapt to these changes. However, with the appetite for new homes, especially from first-time buyers, remaining high, and the government providing funding for additional housing projects, there is hope for continued growth and development in the UK's property market.
The changes to stamp duty in 2025 may lead to increased investing in real-estate as first-time buyers face higher costs, potentially prompting them to seek financing alternatives for housing.
The adjustments to stamp duty in 2025, affecting the housing-market as a whole, could result in a shift in focus from high-end properties to more affordable housing options due to increased financial burdens and reduced buyer activity in the higher-price range.
