What is stamp duty and how will rates change this year? We find out how much more buyers will pay after the March 31 deadline and how we can speed up the process to beat the increases
One of the biggest additional costs to consider when buying a home is stamp duty.
Many starters are currently exempt from tax. But from April 1 this year, the zero rate threshold will be increased, meaning that more starters will receive an invoice.
For other buyers – those who are already on the ladder and moving into their next home – the costs will be higher.
We look at what stamp duty is, how much it rises and what you can do to speed things up if you’re hoping to move before the walks start.
What is stamp duty?
Stamp duty land tax (SDLT), to give it its full title, is a tax paid when you buy a property in England or Northern Ireland.
As it stands, buyers will pay no tax on up to £250,000 of the value of their property. So if you buy a house below this price, you are exempt from stamp duty.
After this, buyers pay 5% tax on the next £250,000 up to £925,000. Above this amount it increases to 10% and then to 12% for those buying homes for £1.5 million or more.
First buyersIn the meantime, take advantage of extra lighting. No stamp duty will be charged on amounts up to £425,000. Above this you will be charged 5%, up to a maximum of £625,000.
Buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) and in Wales this is Land Transaction Tax (LTT).
What changes will happen in stamp duty in 2025?
The rates described above apply until March 31, 2025, but from April 1, things will change and the average tax bill will increase by £2,500, according to Coventry Building Society.
The zero rate for movers will fall from £250,000 to £125,000. Meanwhile, for first-time buyers it will drop from £425,000 to £300,000.
With the average home bought by a first-time buyer in London being £455,923, Coventry has calculated that stamp duty on an average-priced first-time buyer home in the capital will rise from £1,546 to £7,796.
How will these changes impact home buyers?
Buying a house will, as you can see, become more expensive from April 1. But as the March 31 deadline draws closer, the market is bracing for a flurry of activity buyers rush to complete.
Jonathan Stinton, head of mortgage relations at Coventry Building Society, said: “It will be a busy few months for buyers, sellers and everyone involved in the process, as people race against the clock to save themselves thousands of pounds in tax.
“Not every part of the process is in your hands, but staying organised, seeking expert help and acting quickly will hopefully reduce some of the stress and help people get their keys before the deadline.”
How can buyers accelerate their purchase to meet the deadline?
Buyers who have not yet found a home and have not yet made an offer will have to act quickly. Analysis by mortgage broker Mojo Mortgages showed that January 16 was the ‘last realistic date’ to start the home buying process if you want to have a chance of meeting the deadline.
Here are a few things you can do if you’re racing against the clock and want to ensure a speedy process.
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Make sure your paperwork is in order
Ensure that your mortgage application goes smoothly by preparing all your documents in advance.
Stinton explained that lenders will want to see proof of your income and identification before offering you a mortgage.
“It varies from lender to lender, but you may be asked for the latest pay slips and P60, or the latest bills or tax returns if you are self-employed,” he said.
“Bank statements are not always requested, but if they are, the lender will likely ask for original copies rather than copies printed at home. Request these from your bank a few weeks in advance, so that you can be sure that they will arrive on time when you need them.”
Also make sure you are registered to vote as this allows lenders to quickly verify your identity.
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Find a good carrier
Hiring a lawyer who is efficient is crucial if you want to meet the deadline. Stinton suggests that you look for someone who has experience dealing with tight deadlines and that you prioritize this over getting a cheap price for their services.
“Under these circumstances, paying a little more in legal fees for someone who can process your paperwork quickly could save you thousands in taxes,” he explained.
“You can even speak to a lawyer before you find a home; they can start some of the identity checks while you are still trying to find your home.
“It’s likely they’ll need photo ID and address ID, so check with them to see if they require originals, or if certified copies are acceptable.”
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Book surveys and valuations in a timely manner
Stinton recommends that you book appraisals and valuations as soon as your offer has been accepted to ensure they proceed quickly. Check this out article that explains more about surveys and how they work.
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Prepare your deposit
Lenders will need to see evidence of your deposit, so if it is donated by a family member, further checks will be required. If this is the case, please let your lawyer know as soon as possible.
Even if it is in your bank account, you must show original copies of bank statements as proof. And for those whose deposit comes from the sale of your current home, you must submit a mortgage statement.
There are certain types of savings accounts that require a notice to withdraw the money – so act quickly if yours is stuck in one of these. “If you are prepared for these things, you can avoid delays down the line,” Stinton said.