Homebuyers rushed to complete their property purchases in March ahead of the upcoming stamp duty hike, new data reveals.
According to an analysis by Coventry Building Society, the Treasury collected a total of £1.4 billion in stamp duty receipts that month. This marked a £357 million increase compared to the previous month and a £544 million (63 per cent) rise from March 2024.
March was the final month where buyers could benefit from reduced stamp duty thresholds. From 1 April, the nil-rate threshold for home movers dropped from £250,000 to £125,000, increasing the tax bill on an average-priced home in England from £2,082 to £4,582.
For first-time buyers, the relief threshold fell from £425,000 to £300,000. In London, where the average first-time buyer property costs £477,695, the stamp duty bill for a typical buyer surged from £2,634 to £8,884.
So far this year, homebuyers have already paid £3.3 billion in property taxes. The new thresholds now align with levels originally set in 2014, when the average house price in England was £191,986, compared to £291,640 today.
At that time, the average tax bill was £1,340, whereas it has now increased to £4,582, according to Coventry’s estimates.
Stamp duty was temporarily reduced in 2022 as part of the Conservative government’s growth plan. Jonathan Stinton, head of mortgage relations at Coventry Building Society, commented, “March was always going to be a busy month for homebuyers, with people rushing to complete before the stamp duty cliff edge.”
He added, “Now that the deadline has passed, many will face thousands more in upfront costs, which can be a significant burden, especially when people are already juggling deposits, legal fees, and moving expenses.”
Stinton also noted that such changes affect not just individual buyers but can shift the entire market. Some buyers might delay their move, while others could be priced out of areas where average house prices exceed the new thresholds.
This raises questions about whether the property tax system is keeping up with today’s housing market, where rising property prices have led to skyrocketing tax bills.
What will stamp duty changes mean for the market?
Looking ahead, some experts predict that the stamp duty surge will be followed by a period of stagnation.
This pattern occurred in July 2021, after the previous stamp duty holiday, introduced during the pandemic, began to phase out. As a result, average house prices fell by 4.7 per cent in just one month, dropping from £242,777 to £231,386, a decline of more than £10,000, according to Land Registry data.
The stamp duty holiday was fully phased out by 30 September 2021, which led to another 2.5 per cent drop in house prices in October.
Jonathan Hopper, chief executive of Garrington Property Finders, a buying agent, believes that stamp duty receipts may fall in the coming months.
He commented, “The £1.4 billion paid into Government coffers in March could prove to be a high-water mark for stamp duty receipts, and this figure may not be surpassed for some time.”
Hopper further added, “In an ironic twist, the Chancellor’s decision to increase the tax burden on thousands of homebuyers may end up delivering less revenue for the Treasury, not more, making this tax grab less than a stellar success.”
He explained that the stamp duty reduction had caused a distorting effect in the market, where some buyers brought forward their purchases to save on taxes.
Hopper expects to see a drop in activity as buyers adjust to the higher stamp duty rates. The number of potential buyers contacting estate agents fell in March, and with those transactions now complete, some areas are experiencing a “morning after” effect, where the number of buyers has noticeably reduced.
He noted that, in fact, the market had already begun to slow in the final weeks of the stamp duty surge.
Looking ahead, Hopper suggests that the market is once again being shaped by the basic forces of supply and demand. With an increasing supply of homes available for sale each month, those looking to move will have more options to choose from.
This higher supply, combined with recent reductions in borrowing costs by mortgage lenders, could result in homes becoming more affordable in the coming months, keeping price increases modest.
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