Race to save up to £11,250 for first-time buyers ahead of stamp duty rise in April

First-time buyers who have completed their sale before the stamp duty deadline have spoken of their relief, with one describing how the potential extra cost could have been a “deal breaker”.

Jenny Lianos, 32, recently completed on a one-bedroom flat in Chiswick, London.

She said: “I put the offer in January, and since then it’s been a race to complete ahead of the stamp duty deadline. I paid £525,000 for the property and knew from the outset that stamp duty could be a deal breaker.

“Completing the sale in March meant that I paid £5,000, however, if this had been pushed into April, I’d have had to pay £16,250.

“Frankly, that was over £11,000 I didn’t have. It means there has been a huge amount of pressure on my solicitor and broker to get everything sorted.

“Thankfully everyone has been understanding of the situation, and I was able to get my keys in plenty of time.”

Among the changes, first-time buyers will see their “nil rate” band reduce from £425,000 to £300,000 and home movers will see their zero rate threshold halve from £250,000 to £125,000. Stamp duty applies in England and Northern Ireland.

According to research from Barclays, home buyers estimate they will pay £6,512 in additional fees on average if their sale is not completed before the April 1 deadline.

Colleen Babcock, a property expert at Rightmove, said: “More than half a million homes are currently going through the process of legally completing.

“Home movers who are in England, and still have a chance to beat the March 31 stamp duty deadline, will be rushing to finalise their paperwork, and doing all they can to avoid paying higher tax charges from April.

“Most affected by the higher charges will be first-time buyers in higher-priced areas of the South, where some could pay up to £11,250 more in stamp duty from April.

“London, one of the most affected areas due to higher property prices, is where we’re seeing more first-time buyers going through the completion process compared to last year, many who will spend the coming days trying to beat the deadline.

“Agents tell us they don’t expect a major impact on activity after March’s deadline, and that they have been working with buyers and sellers to factor in additional charges.

“There are still many areas of England where there is good availability of homes under the stamp duty-free threshold for first-time buyers.

“Overall, we’re still seeing greater demand from new buyers than a year ago, which is encouraging for the rest of the spring market.”

Calculations by Rightmove show how first-time buyers in London who are looking to escape stamp duty charges could be particularly affected.

The website estimates that less than one in 10 (nine per cent) homes on the market in the capital are priced at under the £300,000 “nil rate” threshold kicking in from April 1, compared to 27 per cent which are under the current £425,000 zero stamp duty threshold.

By comparison, in the North East of England, three-quarters (74 per cent) of homes for sale will still be under this threshold from April 1, down from 87 per cent currently, Rightmove estimates.

On average, UK homeowners who had used additional strategies to get on the property ladder faster, such as investing in financial products, said their efforts had helped them buy a property around two years earlier than they had initially expected.

For Dan Barker, 29, a Lifetime Isa (Lisa) was crucial in helping him onto the property ladder.

He told how he used a Lisa from provider OneFamily to help buy his flat in Bristol in November last year.

Mr Barker started to save into a Lisa in 2019, saying his mother had encouraged him and his brothers to open accounts “as it offers a ‘free’ 25 per cent on anything you save up to £4,000 per year”.

Mr Barker, who grew up in Swansea and works in Bath, had set himself a deposit goal of £30,000 and went on to buy his flat for £280,000.

That price would still be under the new £300,000 stamp duty “nil rate” threshold – although property values often increase over time and Mr Barker has also been upgrading his home since he bought it by carrying out renovations.

Mr Barker added: “With the bonus and increase in value from the stock market combined, by the time I bought my flat the total value was £32,500 – so I’d received an extra £11,450.”

He added: “I bought by myself which can make it really difficult to afford, but the extra money I received by investing into a Lisa made it possible.”

Mr Barker said he had also moved back in with his parents to make it easier to save.

He had previously been spending nearly £900 per month on rent and bills – “so straight away I had almost an extra grand to put into savings every month”.

He added: “If I hadn’t moved home and invested into a Lisa, I wouldn’t have been able to afford the property I’ve got now. And it would’ve probably taken me at least another three or four years to get on the property ladder.”

He said that, regarding the stamp duty changes: “It only added to the sense of time pressure as £300,000 was around what I was looking at. I wouldn’t say it was my primary driver for buying when I did, but definitely a consideration.

“Had I put off buying, I may have been impacted by the change, so I’m glad I did (it) when I did.”