Homebuyers warned tax bill could hit £11,250 as stamp duty deadline looms

The temporary increase to stamp duty thresholds will end on March 31, 2025, and it’ll mean tax on an average-priced home in England is set to jump by thousands.

Laura Suter, director of personal finance at AJ Bell, warns that Chancellor Rachel Reeves has "thrown cold water" on the market's fortunes with this impending tax increase.

The looming deadline is expected to create a flurry of activity in the housing market as buyers rush to complete purchases before the new rates take effect.

Currently, those purchasing properties worth up to £625,000 benefit from reduced stamp duty rates as they pay no tax on the first £425,000 and five per cent on the remainder up to £625,000. However, from April 1, 2025, this threshold will drop significantly.

The property limit for stamp duty reduction will be lowered to £500,000, with only the first £300,000 tax-free.

This change means a first-time buyer purchasing a £625,000 home will no longer be eligible for the tax break, resulting in an £11,250 increase in their stamp duty bill.

Suter said: "First-time buyers will be hit the hardest as they see their tax-free band dramatically reduced. At the same time, those buying a more expensive first home will no longer be eligible for the stamp duty break."

Home movers will also face increased costs of up to £2.500 more.

Currently, no stamp duty is paid on the first £250,000 of a property purchase, with a five per cent rate on amounts up to £925,000. a property purchase is free of stamp duty, and then you pay 5 per cent on any amount up to £925,000.

However, from April only the first £125,000 of a property purchase will be stamp duty-free, with a two per cent rate charged from £125,000 to £250,000.

The re-introduction of the two per cent band for stamp duty means that home movers will pay up to £2,500 more on their tax bill.

Suter continued: "Well inevitably see a flurry of people looking to lock in their home purchase before the deadline next March with estate agents and solicitors braced for some long days ahead of the finish line."

The impending stamp duty changes are likely to cause significant market disruption. As seen during previous stamp duty adjustments, a rush to complete purchases before the deadline could lead to a boom in house sales.

This surge in activity may push property prices up and increase competition in the housing market. Many buyers will be keen to secure their purchases before facing higher tax bills.

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Estate agents and solicitors are expected to face a busy period leading up to March 2025, but Surer warns the rush to buy properties could distort the market, potentially creating artificial price inflation.

Suter said: "We saw a similar story when stamp duty breaks were introduced during the pandemic and then expired, with a boom in house sales ahead of the deadline."