Coventry Building Society issues stamp duty warning as ‘buying a home will become more expensive’

What is stamp duty?

Stamp duty is charged to taxpayers once they buy residential property costing more than £250,000, unless they are eligible for first-time buyer relief.

If they are eligible for first-time home buyer support, they will pay no stamp duty on homes costing up to £425,000 and a reduced rate on property purchases of up to £625,000.

The rate of tax is charged at five per cent for properties priced between £250,000 and £925,000, with those costing between this amount and £1,500,000 being hit with a 10 per cent charge.

At its highest rate, stamp duty is charged at 12% on residential properties worth over £1,500,000.

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For this fiscal year, UK homebuyers paid £4.4 billion in stamp duty, which is the same amount paid by those buying property in the same period in 2023.

However, an upcoming change to existing tax thresholds means many households could pay more to HM Revenue and Customs (HMRC) in the coming months.

In March 2025, the stamp duty threshold will drop from £250,000 to £125,000.

As a result, tax on an average priced house in England will fall from £2,411 to £4,911.

In addition, first-time home buyers will see their threshold drop from £425,000 to £300,000 in March 2025.

Jonathan Stinton, head of mortgage relations at Coventry Building Society, noted that both Labor and the Conservative Party had not made big promises on the levy ahead of the upcoming general election.

He explained: “Stamp Duty is not in every party manifesto but it will certainly be near the top of the to-do list for whoever is chancellor on July 4th.

“In a few months, the temporary thresholds will expire and buying a home will become much more expensive.

“As things stand, someone buying a mid-priced house in England next April will have to pay an extra £2,500 to the taxman.

“The ideal opportunity to act will be at the next budget, which will probably be in September.

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“Leaving it longer than that will increase uncertainty and could distort the housing market as buyers and sellers try to beat the March deadline.”

Homebuyers have been forced out of the housing market by rising house prices.

In addition, homeowners have been forced to pay increased repayments for the past two years.

This was a direct consequence of the Bank of England’s decision to raise and hold the base rate at 5.25%.