How Stamp Duty Changes Will Affect Home Buyers
The new Labour government’s first budget has now been released and sets out key changes for how Stamp Duty Land Tax (SDLT) works in England and Northern Ireland. These changes will have a significant financial impact for many home buyers, including first-time buyers and those purchasing their main home, as well as anyone buying a second home or buy-to-let property.
In this article, we look at how Stamp Duty is changing for first time buyers and home movers, when these changes will take effect, why they are being introduced, the recent changes to Stamp Duty for second home buyers and what home buyers need to do to account for these changes.
Need help with buying residential property? Please contact our highly experienced Residential Conveyancing team who will be happy to advise.
Key points to know about Stamp Duty Land Tax changes
From 1st April 2025:
- The Stamp Duty threshold for first-time buyers will decrease to £300,000 from the previous rate of £425,000
- First-Time Buyers’ Relief will only be available on properties with a maximum purchase price of £500,000, down from the previous limit of £625,000
- The nil-rate band (the value of a property exempted from Stamp Duty) for other buyers purchasing their main home will be reduced to £125,000 from the previous level of £250,000
- The new Stamp Duty rates are a return to the rates that were in place prior to September 2022 when the previous government introduced a temporary increase to the thresholds
Already in force:
- Additionally, the Stamp Duty surcharge when buying a second home in England or Northern Ireland increased from 3% to 5% on 31 October 2024
- The government’s aim with these changes is to increase Stamp Duty revenue and give first-time and main home buyers an advantage over people purchasing second homes and buy-to-let properties
- Land Transaction Tax (the Stamp Duty equivalent in Wales) and the Land and Buildings Transaction Tax (the Scottish equivalent) are unaffected
- Home buyers need to be aware of the changes and when they take effect so that they can plan their purchases and budget accordingly
How Stamp Duty Land Tax is changing for first-time buyers
First-time buyers generally pay a reduced rate of Stamp Duty Land Tax due to a First-Time Buyers’ Relief. This works by raising the property value threshold above which Stamp Duty applies if everyone whose name will be on the property title qualifies as a first-time buyer, and the property being purchased will be their main home.
Since September 2022, this threshold for first-time buyers has been £425,000, but from 1 April 2025 it will reduce back to the pre-September 2022 level of £300,000. Additionally, First-Time Buyers’ Relief can only be claimed on properties below a certain value. Currently, this is £625,000 but this will also be reduced from 1 April 2025, falling to £500,000.
As the average first-time buyer home currently costs £227,757, most first-home purchasers should be unaffected by the change. However, those buying in more expensive areas, such as London, could be impacted.
Changes to Stamp Duty for main home buyers
For people buying their main home who are not first-time buyers, there is a lower Stamp Duty threshold (also called the ‘nil-rate band’). Since September 2022, this has been £250,000 but it will fall back to the previous level of £125,000 from 1 April 2025. A 2% rate of Stamp Duty will then apply on the value of a property between £125,001 and £250,000.
The new Stamp Duty Land Tax bands from 1 April 2025 will be:
| Property Value | SDLT Rate |
|---|---|
| Up to £125,000 | 0% |
| £125,001 – £250,000 | 2% |
| £250,001 – £925,000 | 5% |
| £925,001 – £1,500,000 | 10% |
| £1,500,001+ | 12% |
Please note: The SDLT rate only applies to the portion of a property’s value within each band. For example, for a property worth £1,000,000, the first £125,000 would be exempt from SDLT, the next £125,000 would be charged at 2%, the following £675,000 at 5% and the remaining £75000 at 10%.
Average house prices across the UK are currently £293,000, according to the most recent government data, suggesting that most home buyers will pay more Stamp Duty under the new rates.
How Stamp Duty is increasing for second home buyers
Anyone in England or Northern Ireland purchasing a residential property in addition to their main residence pays a higher rate of Stamp Duty. Previously, this rate was 3% higher than for those purchasing a main residence, but this has risen to 5% as of 31 October 2024.
Below are side-by-side comparisons of the SDLT rates for main home buyers and second home buyers currently and after 1 April 2025, when the thresholds for all buyers will change.
SDLT rate comparison for transactions completing up to 31 March 2025:
| Property Value | Standard SDLT Rate | Second Home SDLT Rate |
|---|---|---|
| Up to £250,000 £125,001-£250,000 |
0% | 5% |
| £250,001-£925,000 | 5% | 10% |
| £925,001-£1,500,000 | 10% | 15% |
| £1,500,001+ | 12% | 17% |
SDLT rate comparison for transactions completing after 1 April 2025:
| Property Value | Standard SDLT Rate | Second Home SDLT Rate |
|---|---|---|
| Up to £125,000 | 0% | 5% |
| £125,001-£250,000 | 2% | 7% |
| £250,001-£925,000 | 5% | 10% |
| £925,001-£1,500,000 | 10% | 15% |
| £1,500,001+ | 12% | 17% |
When and why Stamp Duty is changing
As covered above, Stamp Duty rates for first-time buyers and main home purchasers will change from 1 April 2025. The rates for second-home buyers increased on 31 October 2024 and will increase again on 1 April 2025 in line with the changes for all buyers.
The changes for first-time and main home buyers are effectively a reversal of the temporary Stamp Duty relief introduced in September 2022 by the previous government, returning SDLT rates to their previous levels for these buyers.
Government projections suggest that these changes to SDLT will bring in millions of pounds in extra revenue to the Exchequer, worth an estimated £115million in the 2024-2025 tax year and £90million in the 2025-2026 tax year.
The government’s stated aim in increasing SDLT on second home purchases is to “provide those looking to move home or purchase their first property with a comparative advantage over those purchasing additional property”.
What do home buyers need to do about the Stamp Duty changes?
Anyone in the process of buying a residential property or thinking of doing so soon needs to be aware of these changes and how they might impact their costs.
If a purchase can be completed before 1 April 2025, then it will likely be subject to the current SDLT rates rather than the new ones that come into effect on that date. Therefore, there may be a significant cost benefit to scheduling completion before this date.
It is also good to have a clear idea of what your Stamp Duty bill will likely be before you make an offer on a property. You can then make sure that you budget for the Stamp Duty bill and other costs, such as conveyancing and moving fees. You can see how much your SDLT bill will likely be using the government’s Stamp Duty calculator.
How Longmores can help with buying homes
Longmores’ residential conveyancing experts have decades of combined experience helping first-time buyers, movers, second-home buyers, and investors. We can guide you through the entire process, ensuring you are fully aware of all costs and supporting you with your budgeting.
To discuss how we can help with all aspects of residential property law, please contact our highly experienced Residential Conveyancing team who will be happy to advise.
Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.
