Stamp Duty: Tempted to buy before the April rise?

If you are looking to buy a property this New Year, remember that the thresholds at which you start paying Stamp Duty are scheduled to be lower from the beginning of April.

That means thousands more people, including some first-time buyers, will fall within the sights of the ‘cliff edge’ property tax.

Between now and then, and assuming purchases can be agreed and finalised, we could see a welcome interim boost to the housing market with more activity locally and nationally.

Rates and thresholds

Currently, most buyers pay no Stamp Duty on properties selling for £250,000 or less.  The leeway is more generous if you are a first-time buyer as the threshold is not reached until the value is £425,000.

This is all set to change from April. Instead of £250,000, the threshold for most buyers will be just £125,000. And for first-time buyers, the current £425,000 will drop to £300,000.

House prices tend to be comparatively higher in much of the south of England, including areas of Portsmouth and Southsea, so more buyers here can expect to pay Stamp Duty than those in other parts of the country.

The current rates are: five per cent of the value of homes priced from £250,001 to £925,000; ten per cent on those worth £925,001 to £1.5 million; and 12% on those above £1.5 million.

It’s a ‘cliff edge’ because you pay nothing up to the lower threshold, so if the property sells for £249,999 there is no Stamp Duty bill at all. One pound more than £250,000 and you start to pay five per cent on the whole of the excess. Say, for example, the price is £300,000, the excess is therefore £50,000 and so five per cent of that comes to £2,500. There are similar ‘edges’ as you go up through the values and rates.

Average prices

According to Rightmove, house prices in Portsmouth averaged £278,825 over the past year. Most of those were terraced homes selling for an average of £283,156. Flats went for an average of £195,799 with semi-detached properties going for £352,716.

In Southsea, the overall average was £281,816 with terraced homes averaging £302,851. Flats sold for an average of £210,461 and semi-detached properties for £471,233.

As well as those seeking properties as their main residence, the Stamp Duty changes will impact prospective landlords considering ‘second home’ activity in the BTL (buy-to-let) market, and even more so if they are looking to acquire multiple properties for their portfolios.

Market impact

The question for the next three months then is whether or not we will see home-buying plans brought forward by those keen to take advantage of the existing thresholds before they disappear.

Of course, Stamp Duty is just one of many factors in a house purchase. A finalised sale price can depend on negotiations between buyer and seller that take into account a range of considerations.

It’s possible that mortgage lenders will respond positively to the prospect of stronger first-time buyer activity now by offering attractive deals and pricing.

And there are already grounds for optimism about the market as we enter the first half of 2025.

While others continue to wait to see what further base rate cuts may be agreed by the Bank of England (the next decision is due on 6 February 2025), reduced mortgage rates were announced on New Year’s Eve by both the Leeds Building Society and HSBC. These moves followed a cut by Halifax on remortgaging deals due in early 2025.

Certainly, this first quarter of the year looks to be an ideal time to reserve mortgage deals while rates are comparatively favourable.

Best advice

As ever, those anticipating a house purchase for themselves to live in or as a landlord for the rental sector should be aware of market conditions.

The key message is to ensure you take well-researched advice from property experts.

One recommendation for all is that if you are not going to complete a purchase until after the start of April, you should include the additional Stamp Duty fees in your plans and allocate budget towards it.

We’re always here if you want to have a chat about the financial side of homebuying, investing, selling or renting.

And for more information, we highlight a range of essential indicators about the local property scene on our website that you might find useful.

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