The October 2024 Budget introduced significant changes to Stamp Duty Land Tax (SDLT), including a significant shift away from the current tax threshold for buyers purchasing their first home.
This article will explore what has changed and how buyers can avoid paying more than expected for their first home.
From April 2025 the stamp duty threshold for first homes will be lowered from £425,000 to £300,000. From then on first-time buyers will need to pay a stamp duty of 5% for properties costing between £300,000 and £500,000.
Buyers at the lowest end of this bracket could add £15,000 to the cost of buying a £300,000 home.
Property buyers have 14 days to file a return to HMRC and stamp duty following the completion of a property purchase. In most cases a solicitor or conveyancer will calculate and pay stamp duty on behalf of the buyer, having collected the money from them in advance.
Buyers who cannot afford to pay their stamp duty bill can borrow more on their mortgage to cover the bill. However, this will mean paying further interest to cover the additional borrowing, which can significantly add to longer-term mortgages.
The good news for first-time buyers is that changes to SDLT won’t occur until April 2025. This means that buyers will have time to complete their current purchases, while those just starting their buying journey will have time to adjust their plans accordingly.
Buyers of properties exceeding £300,000 may need to increase the amount they have saved to cover the cost of stamp duty. Alternatively, they could also increase the amount they wish to borrow on their mortgage to cover the cost of stamp duty, but borrowers should speak to an expert mortgage broker before taking this action to ensure that they get the best possible deal and can keep their mortgage repayments affordable.
Homes costing less than £300,000 will remain exempt from stamp duty. Buyers unable to afford or who simply want to avoid paying stamp duty could consider lowering the value of their first property, or work with a trusted estate agent to move quickly and complete their purchase before April 2025.
As a trusted estate agency with over 40 years of industry experience, Edward Mellor offers fully integrated financial, planning, conveyancing, and surveying services under one roof.
If you’re looking to get onto the property ladder and are unsure how the rise in SDLT will impact you, our team of qualified mortgage experts are here to help.
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