First-Time Buyers Pay Thousands in Stamp Duty Despite Tax Relief
New figures from HM Revenue and Customs (HMRC) show that first-time buyers are facing significant upfront costs, with many paying thousands of pounds in stamp duty despite qualifying for tax relief. The data, obtained through a freedom of information request on behalf of the money app Plum, covers the 2024-25 financial year and highlights the financial strain on new homebuyers.
Average Stamp Duty Payments Revealed
The HMRC data indicates that first-time buyers who claimed relief and had a tax liability paid an average of £4,073 in stamp duty. It is important to note that these figures only include individuals who claimed first-time buyer relief, not all first-time buyers. During most of the 2024-25 tax year, the nil-rate stamp duty threshold for first-time buyers was set at £425,000, meaning those who paid stamp duty typically purchased homes exceeding this amount.
More than 13,000 relief claimants paid £5,000 or more in stamp duty during the year, according to the data. From April 2025, the nil-rate threshold for first-time buyers was reduced from £425,000 to £300,000, making the tax relief less generous. Under current rules, buyers purchasing their first home for more than £500,000 must pay standard stamp duty rates, down from the previous limit of £625,000.
Increased Financial Pressure on Buyers
Rajan Lakhani, a personal finance expert at Plum, stated that the reduced thresholds are adding to the financial challenges already faced by first-time buyers. He explained, “Stamp duty has long been one of the most hated taxes there is, but the pain faced by first-time buyers is particularly acute given the financial challenges they already face in raising a deposit. With the lower thresholds now in place, more people will find themselves paying stamp duty and paying more of it.”
Lakhani suggested that Lifetime ISAs (LISAs), which offer a Government bonus of 25% on savings up to £4,000 annually, could help offset costs. He noted that 12,000 first-time buyer transactions last year involved relief claimants paying less than £2,000 in stamp duty, an amount that could be covered by maximizing the LISA allowance over two years.
Stamp Duty as a Growing Obstacle
Aneisha Beveridge, research director at Connells Group, emphasized that stamp duty is becoming an increasing barrier for new buyers, especially in higher-priced areas. She said, “Saving for a deposit is often still the biggest mountain most first-time buyers have to climb - but for a growing number, the stamp duty bill waiting at the top is adding to the strain.”
Across Connells Group, around 26% of first-time buyers purchased homes over £300,000 last year, placing them in stamp duty territory. This compares to approximately one in seven in 2017 when the £300,000 nil-rate band was first introduced. The impact varies by location, with three-quarters of first-time buyers in London, where the average spend is around £440,000, now buying above the threshold.
Beveridge added, “For many, that means finding an extra £7,000 for stamp duty - roughly the equivalent of just over three months’ rent in the capital - on top of an already chunky deposit.” Despite these added costs, she noted that conditions have improved slightly recently due to declining mortgage rates and sustained wage growth.
Government Response and Future Plans
The Government has announced plans to consult on a new first-time buyer savings product that would provide a bonus for home purchases. It has confirmed that individuals will still be able to open and contribute to a Lifetime ISA until the new scheme is introduced. This move aims to alleviate some of the financial burdens faced by new buyers in the challenging property market.
