As the anticipated stamp duty deadline looms, homebuyers in England and Northern Ireland are preparing for what could be a major financial blow. The end of the temporary stamp duty break is approaching. Consequently, the average home-mover could face an additional £2,500 in expenses. This amendment does not cover Scotland and Wales, where different property taxes are in operation. It will hit first-time buyers especially hard. This is acutely felt by first time buyers of properties between £500,001 and £625,000 especially in London and the south east. Property values have increased dramatically in these neighborhoods. Wholesalers or others who buy at auctions are rushing to close deals prior to April when the stamp duty relief ends.
Kwasi Kwarteng – the then Chancellor – introduced the stamp duty break on his 2022 mini-Budget. This measure raised the exemption threshold for first-time buyers to £425,000 on properties worth up to £625,000. It permanently doubled the starting threshold for this tax. However, this relief will soon begin to phase out. In terms of housing market impacts, first-time buyers will benefit from the exemption level reverting to £300,000 for properties costing less than £500,000. Properties with a purchase price under £250,000 will continue to be stamp duty-free.
For most first-time buyers, the reason they want to speed up their purchasing process is due to the first-time buyer discount. Buyers are anxious because they know the exemption level will be changing shortly. They are understandably anxious to save as much money as possible before the April deadline hits.
“I’m not just concerned about the financial impact of this delay on me,” said Sue.
Sue further explained the ripple effect of these added costs:
“For me it’s £2,500: This would pay for our family holiday with the grandchildren this year. For my purchaser it’s £2,500: a young couple with a baby. For their first-time buyers it’s over £5,000. For the person I am buying from its £2,500. And so on.”
Ben, another buyer caught in the rush, shared his situation:
“Fortunately, the property we are buying is chain-free with the sellers keen to move.”
However, he acknowledged challenges ahead:
“We have bought a property without flooring which is already going to be a stretch to pay for.”
Dan expressed concern over meeting the deadline:
“We aren’t close to an agreement yet and I’m worried that we might not make the deadline.”
He highlighted the potential financial burden:
“It will be sickening to have to pay £3,500 to the Treasury because of one document. That’s a bed and a sofa for us.”
Lee voiced similar anxieties:
“This may mean we need to renegotiate the price.”
Still hopeful for a reprieve, Lee added:
“Obviously this may jeopardise the sale. We heard rumours of a possible delay being announced in the spring statement, so are holding out hope for that.”
He noted the strain on resources within the property market chain:
“We were warned that surveyors and conveyancers and the whole pipeline is backed up and moving slowly … We will be paying the full rate and on a property costing £510,000, the difference is just shy of £11,000.”
Patrick explained the steep penalty faced by buyers nearing the threshold:
“It’s the fact that at £500,000 you lose all stamp duty relief.”
In fact, the Government’s stamp duty changes have disproportionately affected younger buyers the most. Yet statistics still tell us that the typical first-time buyer is 33 years old. All are working hard to make the most of relief while it’s still available, putting more stress on a very tight market.