A huge property tax cliff edge is looming - and it could cost you thousands of pounds

What is the stamp duty cliff edge?

Currently, there is no stamp duty land tax (SDLT) to pay on residential properties which cost up to £250,000, if it's the only home a person owns.

The next £675,000 of the property value (the portion between £250,001 and £925,000) is subject to a tax rate of five per cent, rising to 10 per cent on any portion from £925,001 to £1.5 million. The SDLT rate is 12 per cent on any remaining amount.

For first-time buyers, there is more SDLT relief - there's no stamp duty to pay up to £425,000 and then five per cent applies on any portion from £425,001 to £625,000.

That's until April 1, when the previous Government's current SDLT relief rules is due to end.

From April, the £250,000 threshold will reduce to £125,000, meaning stamp duty land tax will increase for many buyers.

Likewise, the nil rate threshold for first-time buyers will reduce from £425,000 to £300,000.

Tony Castle, Managing Director at PFG Mortgages, fears many have forgotten about the upcoming cliff edge. “Stamp duty increases seem to have slipped under the radar for many, but people need to have them on their radars as the additional costs could be punitive," he said.

Meanwhile, Michelle Lawson, Director at Lawson Financial, warned: “Amid the noise of falling mortgage rates, the Stamp Duty cliff edge appears to have been forgotten. With many first-time buyers saving hard for a deposit, as it stands a more significant chunk of the savings will go to pay tax after April 2025."

If a first-time buyer bought a property for £425,000, they would currently pay £1,250 in stamp duty, but this would rise to £7,500 after April 1. Lawson said: "That is a massive difference of £6,250 in tax payable."

GB News asked property expert Jonathan Rolande what it means for buyers, who warned that while purchasing a property now before the thresholds change could save thousands of pounds in tax, there is a caveat. “Although buyers will save on stamp duty by purchasing before April they could potentially lose out if for example prices for between now and then interest rates reduce and they are locked into a higher rate mortgage,” he said.

“Buyers would do well to calculate some best and worst case scenarios before deciding whether to rush to beat the deadline.”

Rolande explained estate agents are likely to “do good business” on the affected band of property, as buyers rush to get deals through before the April cliff edge.

However, they will need to be careful with the money they make, he warned, adding: “It will have to last them longer. They will have done perhaps a years’ worth of sales in just half of that time and first-time buyers won’t be replaced once they realise they will be likely to pay high rates of tax.”

Buyers looking to purchase next year but miss the deadline are likely to be immediately affected, however, Rolande did suggest there could be the possibility for them to renegotiate with the sellers.

“Having seen such situations before it is quite possible that savvy buys will renegotiate prices for just missed deadlines and they may be in a strong position to do so given that there will be relatively few first-time buyers to take their place for sometime after the deadline comes into force,” he said.

“Nobody wants to be amongst the first cohort to pay a high rate of tax so memories will need to fade after April 1 before the market returns to normal.

“This means sellers will also be faced with reducing prices to take up the slack. Property developers will prioritise new developments that fall into the affected price bands and rush completion of these perhaps at the expense of other sites which may unbalanced the market somewhat.”

Kim McGinley, Director & Specialist Broker at VIBE Finance, said there is "understandable anxiety" among both mortgage buyers and first-time buyers, explaining she is already noticing a push from people hoping to complete before March 31.

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"There's a sense of urgency to get transactions through, but at the same time, we have to acknowledge that much of this could be speculation," she said.

"The Government hasn’t given any clear signals, which only adds to the uncertainty. For now, I’d advise buyers to stay informed, but not to make rushed decisions until we have clearer details on what the Budget will actually deliver."

For Rolande, aiming to beat the deadline, if possible, could be a good option, provided it “makes sense in every other regard” and “doesn’t mean locking into an unsuitable mortgage or rushing to buy an overpriced or unsuitable property”.

“Purchasers should keep their feet on the ground and remember that they are making a 25 or 30 year commitment on a mortgage and making the largest purchase of their lives,” he urged.

“Frankly, a few thousand pounds either way is unlikely to make very much difference in five to ten years’ time when they will be selling the property so as strange as it sounds, it should not be the main focus of the transaction. That said, human nature is likely to take them in a different direction.”