First-time buyers face stamp duty hike under Labour – how much will it cost to get on the property ladder?

First-time buyers could face paying more stamp duty under a Labour government.

A Labour Party spokesperson has confirmed that, if it forms the next government after this week’s general election, the first-time buyer stamp duty exemption threshold will drop back to £300,000.

The threshold was raised in September 2022 from £300,000 to £425,000 and was due to be reversed in April 2025.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

But while the Conservative general election manifesto pledged to maintain the allowance, the Labour Party has confirmed it will return the threshold to £300,000.

A lower threshold would reduce the choice of properties available to first-time buyers.

For example, there are 51,505 listings on Rightmove up to the value of £425,000 within 40 miles of London. That drops to 28,833 when searching for property listings worth up to £300,000.

Alternatively, first-time buyers could end up paying some of the controversial property tax, particularly where prices are higher around the South East of England.

How much stamp duty could first-time buyers pay under Labour?

The stamp duty exemption for first-time buyers helps remove one of the biggest upfront costs when purchasing a property.

One of the arguments for raising the threshold from £300,000 to £425,000 was that high house price growth, particularly around the south of England, meant many new buyers were falling into the stamp duty net.

Research from home moving comparison website reallymoving, shows the average first-time buyer purchase price in England is currently £283,000, meaning no stamp duty is payable. 

However, buyers in the South East pay £318,000 on average, rising to £451,000 in London, meaning thousands more buyers could have to pay the transaction tax or face higher bills under Labour.

Based on current rates, that means a first-time buyer in London would end up paying £7,550 in stamp duty from April 2025 as they would be £151,000 above the £300,000 threshold.

This may not seem like a large sum in the grand scheme of a property purchase but it comes as mortgage rates also remain high. 

Thanks to lower property prices in North England and the Midlands, very few first-time buyers currently pay any stamp duty on their purchase, according to reallymoving.

In the North East and Northern Ireland, just 1% exceed the current £425,000 threshold. In the East Midlands and Yorkshire and the Humber it’s 2%, versus 3% in the North West and West Midlands.

If the lower £300,000 threshold is reinstated next April under Labour however, 5% of first-time buyers in the North East and Northern Ireland would have to pay the tax, 13% in the East Midlands, 12% in the North West and 14% in the West Midlands.

In London the numbers are starker, with 80% of first-time buyers potentially liable if Labour forms the next government, compared with 49% currently.

Based on an average first-time buyer purchase price of £451,088 in the capital, the typical stamp duty bill could rise from £1,304 currently to £7,554. In the South East, the proportion paying the tax would rise from 17% to almost half at 48%, according to the research.  

“The fact that so far Labour haven’t matched the Conservatives’ policy to make the current higher Stamp Duty thresholds more permanent, will be worrying many first-time buyers hoping to get on the ladder in the next couple of years,” says Reallymoving chief executive Rob Houghton.

“If Labour win, some may well attempt to bring their plans forward if finances will allow, to try and exchange contracts before the end of March next year. In London especially, the potential savings - at over £6,000 on average - are considerable.

“Our research shows it already takes the average First Time Buyer nearly 6.5 years to raise the funds needed to buy a home, rising to 8.5 years in London, and it will take even longer if stamp duty thresholds are lowered once again.”

What housing policies are in the general election manifestos?

Stamp duty is just one area of the housing market and there are other initiatives from Labour and other political parties that could help first-time buyers and renters.

Both Labour and the Conservative Party have committed to a permanent form of the mortgage guarantee scheme to help first-time buyers with low deposits.

The Tories, Labour, the Liberal Democrats and the Green Party have all stated their commitment to abolishing no-fault evictions. Reform UK, on the other hand said it would “boost the monitoring, appeals and enforcement process for renters with grievances”. 

As well as abolishing no-fault evictions, Labour has said it would empower tenants to challenge unreasonable rent increases.

Housing is just one issue. We have rounded up the other key proposals to help decide which political party's policies are best for you.