First-time buyers in London face paying £6,250 more stamp duty as Rachel Reeves scraps discount in Budget

First-time buyers in London face paying an extra £6,250 in stamp duty if Rachel Reeves brings to an end a discount, property experts have warned.

The Chancellor is expected to rake in up to £2billion at next weeks Budget by not extending an increase in the thresholds at which people start paying the levy.

The Tories introduced a temporary change to stamp duty in 2022, pushing the tax-free threshold for all homebuyers from £125,000 to £250,000.

This also saw the tax-free threshold for first-time buyers increase from £300,000 to £425,000, as part of changes that are due to end on 31 March next year.

The Conservatives promised before the general election to make the stamp duty discount for first-time buyers a permanent change.

But Ms Reeves will reportedly announce on 30 October that Labour will allow the discount to expire next spring, which is expected to raise £1.8billion a year by 2029-30.

First-time buyers in London face paying an extra £6,250 in stamp duty if Rachel Reeves brings to an end a discount, property experts have warned

The Chancellor is expected to rake in up to £2billion at next weeks Budget by not extending an increase in the thresholds at which people start paying the levy

The Conservatives promised before the general election to make the stamp duty discount for first-time buyers a permanent change

Data provided to The Times by Savills showed first-time buyers in London would pay an additional £6,250 from 1 April, on average, when the tax-free threshold reduces.

This would be an increase from the current average level of stamp duty of £2,752 up to £9,002. The average property price for new homeowners in the capital is £480,040.

In the South East, where the average first-time buyer price is £314,675, first-time buyers would pay £734 in stamp duty, on average, after the discount expires.

The average first-time buyer in the South East does not currently pay stamp duty.

Across the whole UK, the ending of the temporary stamp duty discount will see an extra £2,500 paid on the average home purchase. 

Property experts warned of Britons rushing to complete home purchases before the cliff-edge deadline at the end of March, which is only 160 days away.

Lucian Cook, head of residential research at Savills, said: Ending the enhanced stamp duty break for first-time buyers is going to add to the already high deposit hurdle in London and parts of the wider southeast, suppressing activity levels and entrenching the reliance on the Bank of Mum and Dad.

He added: Pre-announced changes in stamp duty have a history of distorting the market, as buyers rush to take advantage of lower rates when they are offer.

There is little to suggest this will be any different this time around, as the UK house buyer is loath to pass up an opportunity to save on a house purchase.

Aneisha Beveridge, head of research at Hamptons, said: Given that on average its taking 115 days between an offer being accepted and completion, buyers probably need to look at getting a sale agreed fairly soon.

The Chancellor and Prime Minister Sir Keir Starmer have warned of a painful Budget next week as they attempt to fill a claimed £22billion black hole in the public finances.