If you’re a first-time buyer, there are two words that you might not be familiar with – stamp duty. When you are thinking about buying your first home you'll have been saving for a deposit and thinking about how you will pay to kit out your home but there are other costs to account for when buying a property.
It’s important to note that changes are coming to stamp duty very soon for those buying in England and Northern Ireland, changing the amount of relief available to first-time buyers. So, whether you’re deep in your search or still waiting for the right moment to move, here is all the important information you need to know ahead of the changes.
What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is the tax that is due when buying a property or piece of land over a certain price. It was first introduced in England in 1694 during the reign of William and Mary as a way to help fund a war with France.
Instead of buyers all paying one flat rate, the system was updated in 1997 to what we know now, with different bands deciding how much stamp duty is paid.
Alongside property value, the amount paid is also determined by whether it is your first property, whether you own any other properties and what part of the United Kingdom you are buying in. Being a devolved tax means the governments in Scotland and Wales can set their own rules too.
How much would a first-time buyer pay now?
Under the current rules, first-time buyers will pay no stamp duty on properties up to the value of £425,000.
This was increased from £300,000 in 2022 as part of the mini-budget. The idea was to encourage more people to move home and to give first-time buyers a better chance of getting on the property market.
For anyone buying a property over this value, they would pay 5% stamp duty on properties valued £425,000 up to £625,000 and more if the value is above this.
What is changing?
The all-important date to note is 31st March 2025. This is when current stamp duty relief will end and thresholds will revert back. This will mean that stamp duty will be charged 5% on properties worth £300,000 or more for first-time buyers.
According to research by Rightmove, the move will see a 21% drop in the number of homes that will remain free from stamp duty. The areas most affected will be those with higher property prices, such as London and the South East.
What does this mean for first-time buyers
After the 31st March 2025, a first-time buyer buying a property in the South East for the region’s average house price of £383,000 would pay £4,150 in stamp duty. Before this date, they would pay nothing.
For first-time buyers looking to maximise their budget and avoid additional costs, any purchase must be completed ahead of the change in March 2025. Given that property transactions can take anywhere from six weeks to six months to complete, prospective buyers may want to consider their options or bring forward their moving plans.
Get in touch
An important place to start is by speaking with a mortgage adviser. Not only will they help you determine your budget, they will be able to work out if stamp duty is applicable on your purchase, what costs will be involved and will answer any questions you may have.
With affordability remaining a key concern for first-time buyers, understanding stamp duty and what the changes will mean for you is a really important way to keep your plans on track and to potentially bring down the cost of your overall move too.
To book your appointment with a mortgage adviser, please call the office on 028 3839 3050 or email info@almfinancial.co.uk.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 27/11/2024.
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