First-time buyers in southern England hit hardest
Four in five or 83% of homebuyers purchasing a main residence will be subject to Stamp Duty from April, up from the current 49%, new analysis from property website Zoopla has projected.
The shift comes as the 2% Stamp Duty rate on property purchases between £125,000 and £250,000 is reinstated. Only 17% of buyers will be exempt from the tax, limited to purchases below £125,000.
According to Zoopla, buyers purchasing properties above £250,000 — currently representing 49% of transactions — will face an additional £2,500 in Stamp Duty. Meanwhile, 33% of buyers acquiring homes priced between £125,000 and £250,000 will now pay 2% on their purchase, adding up to a maximum of £2,500. These changes are expected to generate an additional £900 million in tax revenue.
The regions seeing the largest increases in homebuyers paying Stamp Duty include the West Midlands, where 66% more transactions will be subject to the tax. The East Midlands follows with a 55% rise, while the North West will see a 50% increase.
First-time buyers will continue to be exempt from Stamp Duty on purchases up to £300,000. Zoopla estimates that 58% of first-time buyers will avoid the tax, benefiting those in lower-cost areas such as the North East, where only 2% of first-time buyers will be affected, as well as Yorkshire and the Humber (3%), Northern Ireland (5%), and the North West (5%).
However, the proportion of first-time buyers paying stamp duty is set to double to 42%, particularly impacting those in London and the South East. Buyers in this region purchasing properties between £300,000 and £625,000 will see their costs increase significantly. A £350,000 home will incur a £2,500 Stamp Duty charge, up from zero, while a £500,000 property will attract a £10,000 tax, up from £3,750. The Stamp Duty on a £550,000 purchase will rise from £6,250 to £15,000. Zoopla estimates these changes will generate an additional £200 million in revenue.
“Stamp Duty has become a big source of tax revenue, approaching £10 billion a year for the government,” commented Richard Donnell (pictured), executive director at Zoopla. “The reduction in tax reliefs from April will see more home buyers paying Stamp Duty.”
Donnell noted that while existing homeowners will face increased costs, many have built up substantial capital gains.
“The average seller has made £60,000 in capital gains so there is flexibility to absorb this cost, but buyers will expect to factor this extra cost into what they offer,” he said.
Donnell also pointed out that first-time buyers remain largely exempt, though those purchasing in southern England will face higher costs.
“These changes hit those buying over £300,000 in southern England the most where buying costs are already high,” he said. “This will reduce buying power and market activity at a local level.
“The case for reforming Stamp Duty remains but the question is where to replace the multi-billion in annual tax revenues.”
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