"The greatest beneficiaries are those looking to buy across southern England where up to half of first-time buyers are looking to buy homes priced between £250,000 and £425,000"
- Richard Donnell - Zoopla
New research by Zoopla has analysed first-time buyer enquiries on properties for sale to identify where the current stamp duty benefit will be retained.
The current thresholds for FTB stamp duty relief were planned to be cut in 2025. This would reverse changes made in the 2022 Mini budget where the threshold for full relief from paying stamp duty as a FTB was raised to £425,000 from £300,000. In addition, the maximum value for partial relief for FTBs was raised from £500,000 to £625,000.
In England and Northern Ireland, there is a tax break for first-time buyers (FTBs) to reduce the cost of stamp duty. This isn't the case in Wales and Scotland as property prices are lower and the way the tax is set most FTBs pay nothing or a very low amount
Data from HMRC shows that in England, 203,300 FTBs claimed ‘first-time buyer relief’ from stamp duty in 2022/23 with savings of £708 million or an average of £3,500 per purchase
150,000 FTBs paid no stamp duty at all while 53,000 had to pay partial stamp duty for the purchase price above the current tax-free threshold of £425,000 up to a maximum of £625,000. Any FTB purchases above this maximum price have to pay the normal level of stamp duty with no tax relief.
Under the proposed changes
Analysis of enquiries for property on Zoopla from first-time buyers over the last six months shows that 8 in 10 FTBs searching for a home on the portal have been looking for homes priced under £425,000 i.e. full relief from stamp duty under current rules.
15% of FTBs have been searching for homes between £425,000 and £625,000 and would pay partial stamp duty, assuming the current rules are extended and 7% of FTBs are looking over the £625,000 threshold and would still have to pay full stamp duty.
In southern England, first-time buyers are generally having to look for higher-value homes and face paying the most stamp duty. Half of the would-be FTBs in London would pay full or partial stamp duty if the current rules are extended.
The benefit of keeping the exemption from stamp duty at £425k helps FTBs buying in London and southern England where up to half of FTBs are looking to buy homes priced between £250,000 and £425,000 - the orange segments in the chart below.
Richard Donnell, Executive Director at Zoopla says: "Our analysis of what first-time buyers are looking to buy on Zoopla shows 8 in 10 would pay no stamp duty if the current measures were made permanent.
"The greatest beneficiaries are those looking to buy across southern England where up to half of first-time buyers are looking to buy homes priced between £250,000 and £425,000. We find that 7% of first-time buyers would still pay full stamp duty, most of whom are looking in London and 15% would pay partial stamp duty.
"A return to the old rules and price thresholds would have seen 30% of first-time buyers paying stamp duty once again.
"The primary challenge for first-time buyers remains the need to afford higher mortgage rates and pass mortgage affordability tests. For many, this means injecting more equity into home purchases to reduce the level of income needed to buy. This impacts buyers across southern England where house prices are highest and average deposits are over £60,000
"Building more homes at a wider range of price points and developing a market for long-term fixed-rate mortgages are the key building blocks to help first-time buyers long term"
