SDLT tax hike drives property market surge

The UK property market is facing a surge in activity as buyers rush to complete purchases before the upcoming Stamp Duty Land Tax (SDLT) changes take effect on 1st April 2025. These changes will significantly impact buyers, particularly those purchasing homes above the new reduced tax thresholds.

Currently, buyers benefit from a higher nil-rate threshold and more generous first-time buyer relief, but from April, these benefits will be scaled back. As a result, many buyers are accelerating transactions to avoid higher tax bills. However, with increased demand comes challenges, including longer processing times, mortgage approval delays, and legal bottlenecks.

What’s Changing with SDLT?

The upcoming SDLT changes set for 1st April 2025 will increase tax costs for most buyers, reducing key exemptions and raising rates on higher-value purchases. These adjustments are expected to slow market activity post-deadline while shifting affordability for buyers, particularly those entering the market for the first time.

Current SDLT Rules (Before April 2025) 

Under the current system, homebuyers benefit from higher tax-free thresholds:

• The nil-rate threshold for all buyers is set at £250,000, meaning no SDLT is paid on the first £250,000 of a property’s value.
• First-time buyers receive tax relief on purchases up to £425,000, with a full exemption on the first £425,000 and reduced rates up to £625,000.
• Higher tax rates apply to second homes and buy-to-let properties, but investor demand has remained stable under these conditions.

New SDLT Rules (From April 2025) 

From 1st April 2025, the government will introduce new SDLT rates aimed at raising tax revenue and discouraging speculative property investments:

• The nil-rate threshold will be cut to £125,000, increasing tax liability for most buyers.
• First-time buyer relief will be reduced, with the exemption threshold lowered to £300,000 and the maximum qualifying property value dropping to £500,000.
• SDLT rates for second homes and buy-to-let properties will increase further, aiming to reduce investment activity.

Example Impact on Buyers 

For a £295,000 home purchase:

• Before April 2025, the SDLT owed is £2,250.
• From 1 April 2025, this increases to £4,750, an additional £2,500 in tax.

For a first-time buyer purchasing a £400,000 home:

• Before April 2025, no SDLT is owed due to first-time buyer relief.
• From 1 April 2025, the buyer will pay £5,000 in SDLT, as the relief no longer covers the full amount.

These changes create a clear incentive for buyers to complete transactions before April to avoid higher tax costs.

Challenges for Buyers

With the SDLT deadline approaching, buyers are facing significant hurdles in completing transactions on time. The surge in demand has put pressure on mortgage lenders, conveyancers, and surveyors, leading to delays that could push completions past the deadline and result in higher tax bills.

Increased Demand and Market Pressure 

Property transactions have spiked as buyers rush to beat the tax hike. This surge has led to bottlenecks across the housing market, with estate agents reporting increased competition for available properties. Sellers are using the urgency to their advantage, often favouring buyers who can complete quickly.

Delays in Mortgage Approvals and Legal Processes 

Mortgage applications are taking longer to process due to the high volume of requests. Lenders are struggling with backlogs, and approvals that once took a few weeks are now stretching beyond a month. Conveyancing delays are also a major concern, with legal firms overwhelmed by rising caseloads. The average time to complete a property purchase has increased to 126 days, meaning buyers starting now are at risk of missing the deadline.

Limited Availability of Surveyors and Valuers 

Surveyors and valuers are in high demand, creating scheduling delays that can slow down mortgage approvals. Any unexpected issues with a survey could lead to renegotiations or additional checks, further delaying the process.

With these challenges in mind, buyers must take strategic steps to fast-track their purchases.

 Strategies for Completing Transactions Before 1 April

With time running out, proactive steps are needed to complete purchases before the SDLT changes take effect. Acting quickly on financing, selecting properties with fewer complications, and working with efficient professionals can help avoid costly delays.

Secure Mortgage Pre-Approval 

Obtaining a mortgage agreement in principle (AIP) before making an offer speeds up approvals. Buyers should prepare all required documents, such as proof of income and deposit funds, to avoid processing delays. Working with a mortgage broker can also help navigate lender backlogs.

Prioritise Fast-Track Properties 

Buyers should focus on:

• Chain-free homes, where no dependent transactions slow the process.
• New-builds, which often have legal work pre-prepared.
• Freehold properties, as leasehold purchases may involve additional legal checks that slow down the process.

Negotiate Speed-Boosting Terms 

Offering flexible move-out dates or agreeing to exchange contracts before April with delayed completion can help secure the lower SDLT rate.

Long-Term Impact of SDLT Changes on the Housing Market

The April 2025 SDLT changes will have a lasting effect on the housing market, influencing buyer behaviour, investor activity, and property prices. While the immediate impact is a surge in transactions before the deadline, the months following will likely see a market slowdown before stabilising.

Short-Term Effects (April – June 2025) 

A sharp decline in transactions is expected after the deadline as buyers who rushed to complete purchases exit the market. With affordability reduced due to higher tax costs, first-time buyers may delay purchases, while second-home buyers and investors could scale back acquisitions.

Mid-Term Effects (July – December 2025) 

By mid-2025, the market is expected to stabilise, but demand patterns will shift. Fewer buy-to-let investors may lead to a slowdown in rental property purchases, creating opportunities for first-time buyers. However, rising SDLT costs may apply pressure for a decrease in prices, especially in regions where affordability is already stretched.

Long-Term Outlook (2026 and Beyond) 

If the market slows significantly, the government may consider further adjustments to SDLT or housing policies to stimulate demand. The changes could also encourage a shift towards alternative property investment strategies, such as commercial-to-residential conversions, to offset tax burdens.

While the immediate effect is a rush to complete purchases, the long-term impact of SDLT changes will depend on how buyers and investors adapt.

Conclusion

With the 1 April 2025 SDLT changes nearing, buyers have been required to act fast to secure lower tax rates. Delays in mortgage approvals and conveyancing make early preparation crucial. After the deadline, the market may slow as affordability declines and investor demand weakens. While first-time buyers may face less competition, higher SDLT rates could make homeownership more costly. Those who move quickly could save thousands, while waiting risks higher expenses and market uncertainty.