First Time Buyer Stamp Duty Savings: Act Before Time Runs Out

JUST 5 MONTHS TO GO – First time buyers have six months left to take advantage of current stamp duty relief and save thousands of pounds on their house purchase. 

Chancellor Rachel Reeves’ autumn budget provided clarity for first time buyers, confirming the government will not scrap proposed stamp duty changes or introduce an extension to current rates of first time buyer stamp duty relief. These decisions will directly impact first time buyers in 2025.

The current rate of stamp duty relief for first time buyers is due to be reversed after 31^st March 2025. But what does this mean for people buying their first home? 

Key takeaways

• The 0% stamp duty threshold for first time buyers will reduce after 31^st March 2025. 

• First time buyers purchasing a home over £300,000 will have to pay stamp duty, while the current threshold for payment is £425,000. 

• First time buyers purchasing a home over £500,000 will no longer benefit from any first time buyer’s relief. This threshold is currently £625,000. 

• Prospective first time buyers may save thousands of pounds by purchasing their home before 31^st March 2025 and benefiting from the current rates of relief.  

• For other home buyers, the stamp duty threshold is reducing from £250,000 to the previous rate of £125,000, meaning stamp duty will be payable from a lower purchase price than currently. 

What is stamp duty? 

Stamp Duty Land Tax, more commonly known as SDLT or simply ‘stamp duty’ is a tax paid when buying a property in England and Northern Ireland.  

It’s not payable on all property transactions. For example, many first time buyers currently benefit from stamp duty relief and so may not need to pay any at all.  

If you’re buying a property in Wales, you’ll pay Land Transaction Tax instead. In Scotland, you’ll pay Land and Buildings Transaction Tax. This article covers stamp duty only. 

What is stamp duty relief for first time buyers and why was it introduced?  

Stamp duty relief is designed to reduce the amount of tax paid when buying a property. There are various types of stamp duty relief. This article focuses on first time buyer relief. 

First time buyer stamp duty relief was first introduced in November 2017 with a threshold of £300,000. The threshold was increased in September 2022 to £425,000. It is designed to help first time buyers get on the property ladder by reducing the upfront cost of purchasing a home.  

What stamp duty do first time buyers currently pay? 

The relief offered to first time buyers means they currently benefit from a higher 0% threshold for stamp duty than other buyers (as long as the property price is no more than £625,000). Instead of paying stamp duty on the cost of a property over £300,000, they currently only have to pay tax on any amount over £425,000.  

Stamp duty for first time buyers is currently set at 5% of the property value over £425,000 and up to £625,000. For properties over £625,000, relief is not available so normal rates of stamp duty apply. 

After 31^st March 2025, first time buyers must pay 5% of the property value over £300,000.  

What stamp duty will first time buyers pay after 31st March 2025?  

The changes mean that if your property transaction completes after 31^st March 2025, you will be required to pay stamp duty on the property’s value over £300,000, instead of the current rate of £425,000.  

Plus, if the property price is over £500,000 (instead of the current threshold of £625,000), you will not benefit from the relief and will have to pay stamp duty at the regular rate on the property’s value over £125,000. The regular rate of stamp duty will return to the same rates seen before 7^th July 2020 – please see below for more details.  

If your transaction completes before the changes come into force (likely on or before 31^st March 2025), you will still benefit from the relief and only pay stamp duty on the property’s value over £425,000.

*Based on the reduction of first time buyer relief and a return to stamp duty rates seen before 7^th July 2020. 

I’m a first time buyer, what do the new rules mean for me?  

In short, the new rules mean that first time buyers buying a property over £300,000 will have to pay stamp duty after 31^st March 2025. Currently, it’s only first time buyers buying a property over £425,000 who must pay it. If the property is under £300,000, you will still not have to pay any stamp duty as a first time buyer.  

For example, a first time buyer purchasing a £350,000 property currently has no stamp duty to pay. After 31^st March 2025, they will have approximately £2500 of stamp duty to pay. For a £450,000 property, a first time buyer currently has to pay approximately £1250 of stamp duty. This will increase to approximately £7500 after 31^st March 2025.  

I’m not a first time buyer, will stamp duty be impacted for me?  

Those who aren’t first time buyers currently do not benefit from the stamp duty relief. However, there are some upcoming changes in stamp duty that may impact you. 

Currently, the stamp duty threshold for other home buyers stands at £250,000. This means that buyers pay 0% stamp duty on the property’s value up to £250,000. This will change after 31^st March 2025, returning to the previous 0% threshold of £125,000. This means that stamp duty will be payable on the property’s value above £125,000.   

Before 7^th July 2020, stamp duty rates for non first time buyers stood at the following: 

• 0% paid on the property value up to £125,000 

• 2% paid on the property value between £125,001 and 250,000 

• 5% paid on the property value between £250,001 and £925,000 

• 10% paid on the property value between £925,001 and £1.5 million 

• 12% paid on the property value over £1.5 million 

There will be a return to these rates after 31^st March 2025. This means that non first time buyers will have to pay stamp duty on the property’s value over £125,000, instead of the current threshold of £250,000, and the 2% rate between £125,001 and £250,000 will be reintroduced. 

*Based on a return to stamp duty rates seen before 7^th July 2020. 

Why is the current rate of stamp duty relief being abolished? 

It’s widely believed that the current rate of stamp duty relief for first time buyers will be abolished in order for the Labour government to raise more funds through taxation. They need to do this as there is a funding gap – the government is spending more money than it’s getting in.  

Thinking of making a move before 31^st March 2025? 

If you’re a first time buyer who wants to purchase a property soon, you might want to think about the financial impact of purchasing your property on or before 31^st March 2025 compared to after, as you could save thousands of pounds. 

If the property you’re buying is likely to cost more than £300,000, it will be cheaper to complete your transaction before 31^st March 2025, as you won’t have to pay any stamp duty on the property’s value up to £425,000. 

If the property you’re buying is likely to cost more than £500,000 but less than £625,000, you will also be better off completing before 31^st March 2025, as this is when the stamp duty relief stops applying to first time buyer’s properties over £500,000 instead of the current threshold of £625,000.  

Bear in mind that most transactions take between two and six months to complete, so the sooner you act, the better chance you have of benefitting from the current rates of stamp duty.

It’s important to have the right conveyancer by your side throughout your home buying journey. Your conveyancer’s job is to take care of all of the legalities of the transaction, but they can also be an important source of advice, especially for first time buyers who have never gone through the home buying process before.  

At Setfords, our experienced conveyancers are here to assist you. No matter the value of your home, or when you want to move, we will help you navigate the process with ease.  

Click the button below to download your free First Time Buyer’s Guide to Conveyancing for more info about the whole conveyancing process:

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More FAQs 

What is a First Time Buyer?

A first time buyer is someone who has never owned a property in the UK or abroad, including inherited property.

You also only count as a first time buyer if you are buying the property to live in – not if you are purchasing a ‘buy to let’ property.

Am I a first time buyer if I’ve inherited a property?

No. If you have inherited property or land in the UK or abroad, you do not count as a first time buyer, since you already own a property. So, you will unfortunately not be able to take advantage of the reduced rate of stamp duty, either now or after the changes come into effect after 31st March 2025.

Do first time buyers pay stamp duty?

Most first time buyers do not pay stamp duty, or pay a reduced amount compared to other buyers. This is because of the stamp duty relief that’s designed to make it more affordable to purchase your first home.

Currently, first time buyers pay no stamp duty on the property’s value up to £425,000. They then pay 5% of the property’s value between £425,001 and £625,000. If the purchase price is above £625,000, they are not eligible for first time buyer stamp duty rates and must pay stamp duty at the regular rate of between 5 and 12% on the property’s value above £250,000.

After 31st March 2025, stamp duty relief for first time buyers is changing. From then, first time buyers will pay no stamp duty on the property’s value up to £300,000. They will then pay 5% of the property’s value between £300,001 and £500,000. If the value is above £500,000, they will not be eligible for relief and must pay stamp duty at the regular rate of between 2 and 12% of the property’s value above £125,000.

Do both people need to be first time buyers to qualify for relief?

Yes. If you are purchasing the property with someone else, whether it’s a partner, family member, or friend, all parties must be first time buyers to qualify for the stamp duty relief. 

Who is eligible for first time buyer stamp duty relief?

There are certain criteria you must meet to be eligible for first time buyer stamp duty relief. The criteria is: 

• You and anyone you are buying the property with must be first time buyers (i.e. never owned a property before, in the UK or abroad). 
• You’re buying the property with the intention to make it your primary residence (i.e. it’s not a buy to let or a holiday home). 
• You must be a UK resident and have been in the UK for at least 183 days (6 months) in the 12 months leading up to your property purchase, or you face an additional stamp duty surcharge, regardless of whether you’re a first time buyer or not. This can be refunded in some circumstances.

Am I eligible for stamp duty relief if someone is helping me with the deposit?

It is common for first time buyers to receive some or all of their deposit as a gift, for example from a family member. You do still count as a first time buyer if you get help with the deposit, as long as everyone you are buying with is also a first time buyer. For example: 

• You receive a gift of £25,000 towards your deposit from your parents. Both you and your partner, who you are buying the property with, have never owned a property before, so you are still eligible for first time buyer stamp duty relief.

• You are buying a property with your parent. They are contributing £25,000 towards the deposit, but they have owned a property before. Since you are not both first time buyers, you are not eligible for relief.

Your conveyancer will be able to advise you on whether you are eligible for the relief based on your specific circumstances.

How much does stamp duty cost?

The cost of stamp duty can vary significantly as it’s all based on the purchase price of the home. Here are a few examples of how much stamp duty can cost, both for first time buyers and other buyers, now and from 31^st March 2024. 

*Based on the reduction of first time buyer relief and a return to stamp duty rates seen before 7^th July 2020. 

How does stamp duty work?

Stamp duty is a tax, set by the government, that buyers have to pay when purchasing a property. It applies to leasehold, freehold, and shared ownership purchases, as well as commercial property and land purchases. 

The amount of stamp duty you pay depends on a range of factors, namely the property price and whether you’re a first time buyer or not. 

As it’s a tax, stamp duty is paid to HMRC.

When do I need to pay stamp duty?

Stamp duty must usually be paid in full within 14 days of completion – when the property’s ownership is transferred to you. 

How is stamp duty paid?

Your conveyancer will typically calculate the amount of stamp duty you owe, arrange the payment for you, and submit your return to the government.

Stamp duty changes for second homes and how this may impact first time buyers

The autumn budget announced that the higher rate of stamp duty for second properties will be rising immediately, from 31st October 2024. Now, anyone buying a second property (such as an investment property or holiday home) will have to pay an additional stamp duty rate of 5% of the property’s value, no matter which threshold the property price falls under.

This move is designed to help make it easier for first time buyers to get on the property ladder, by making investment properties more expensive to acquire and freeing up more supply for first time buyers.

Will the Labour Government change the stamp duty rates? 

The change to stamp duty rates was previously announced by the Conservative government. Since then, the 2024 General Election elected a new Labour government. The new government has not suggested that they plan to scrap the Conservative’s proposed changes, so stamp duty rates will change in March 2025. 

For more information about stamp duty, please click here.