The amount of tax you may need to pay when buying a house is increasing in 2025. We look at what’s happening, when, and how much it could cost you.
Tax when buying a house summarised
You’ll pay stamp duty land tax when buying a house over £250,000 in England and Northern Ireland – but this threshold is being cut to £125,000 from 1 April 2025 so many buyers will pay more tax.
First time buyers typically pay less stamp duty when buying a house due to first time buyer tax relief. But this is also being cut in 2025 so tax bills will be higher for many buying their first home.
If you’re buying an additional property also need to pay an even higher rate of stamp duty after the government hiked rates in October 2024.
And if you’ve used a gifted deposit to buy your home, you could face an inheritance tax bill. Although this depends on your circumstances.
Once you buy your home you’ll have other costs to pay including council tax. And you could face much higher council tax bills if it’s a second home.
What tax do you need to pay when buying a house?
The tax you’ll pay to His Majesty’s Revenue and Customs (HMRC) when buying a house is called Stamp Duty Land Tax. How much you’ll have to pay depends on:
Where the property is located
The purchase price
Whether you’re a first time buyer
Will it be your only property?
Are you a UK resident?
Upcoming Stamp Duty Land Tax changes
Stamp duty changes coming into force on 1 April 2025 mean stamp duty bills will increase for many homebuyers in England and Northern Ireland. This is because the threshold at which you start paying stamp duty was hiked from £125,000 to £250,000 in 2022 as a temporary measure by the previous government and it's going to revert back:
These changes mean stamp duty bills will rise for many buyers from April 2025. For example,
If you buy a house at the UK's average house price of £292,000 before 1 April 2025, your stamp duty bill will be £2,100.
But if you buy a house for £292,000 from 1 April 2025 onwards your stamp duty bill will be £4,600. This means your stamp duty bill will increase by £2,500 due to these stamp duty changes.
First time buyer property tax rises in 2025
If you’re a first time buyer, you may pay less - or even no - stamp duty land tax when buying a house due to first time buyer stamp duty relief.
However, changes to this tax relief due to come into effect in April 2025 mean many first time buyers will pay thousands of pounds more in stamp duty when buying a house.
Here's what's happening:
First time buyer stamp duty thresholds until 31 March 2025
For properties over £625,000 you cannot claim the relief. You'll pay the same stamp duty rates as non-first time buyers.
First time buyer stamp duty rates from 1 April 2025
For properties over £500,000 you cannot claim the relief. You'll pay the same stamp duty rates as non-first time buyers.
Example of how much stamp duty threshold changes will cost buyers
First time buyers in London and the South East are more likely to be affected by stamp duty changes due to higher property prices in those regions.
The average house price in London is £519,579 according to the Land Registry. If you're a first time buyer and buy a house for £519,579 before 1 April 2025, your stamp duty bill will be around £4,700.
But if you buy a house for £519,579 from 1 April 2025 onwards your stamp duty bill will be around £16,000. This is an increase of around £11,300.
In Scotland, the starting threshold for first-time buyers is £175,000. There is no first-time buyer relief in Wales. See stamp duty for first time buyers for more information.
Will I pay more tax if I'm buying a second home?
Yes. If you are buying an additional property, like a second home or a Buy to Let, you will have to pay a higher rate of Stamp Duty.
And in the October 2024 Budget, the chancellor increased the extra amount you'll have to pay on top of standard stamp duty rates from 3% to 5% in England and Northern Ireland.
Plus, the amount of stamp duty you'll pay when buying a second home will also increase from 1 April 2025 due to stamp duty changes.
Stamp duty costs when buying a second home from 1 April 2025
While if you are a non UK resident, you will also pay a 2% surcharge on top.
Do I have to pay more tax if I buy my new house before selling my old one?
Yes. If you buy your new house before selling your current one, you will need to pay the additional stamp duty rate. However, if you sell your former main home within 3 years you can apply for a refund, although time limits apply. Find more information on the HMRC website.
When do you pay stamp duty if buying a shared ownership property?
If you’re buying a shared ownership property and need to pay stamp duty you have two options:
Making a one-off payment based on the total market value of the property, or
Pay any stamp duty due in stages
If you opt to pay stamp duty in stages, you pay anything that’s due on the first purchase amount. But you then don’t make any further payments until you own more than an 80% share of the property.
You can choose which option’s best for you, depending on your circumstances. You can use HMRC’s stamp duty calculator to work out how much tax you would have to pay if you buy a shared ownership home.
Tax and gifted deposits
If you receive a gifted deposit to help you buy a house from for example a parent or grandparent, you won't need to pay any inheritance tax on it if they live for the next 7 years.
But if they die within 7 years, you may need to pay inheritance tax. When it comes to tax, it's always advisable to get expert advice tailored to your circumstances.
Do you need to pay any other types of tax when buying a house?
Council tax
When you buy a house, you’ll need to pay council tax. The amount you'll pay will be determined by:
The valuation band for your home in England and Wales - you can check this on the government's website. If the property is in Scotland you can search on the Scottish Assessors' Portal.
How much your local council charges for that band
Whether you can get a discount or exemption from the full bill.
You may also be able to reduce your council tax by challenging your council tax band. But it's important to do your research carefully first.
Second home council tax
If you’re buying a second home in England, you could face paying twice the amount of second home council tax from April 2025, under a new law. While powers enabling councils in Scotland to charge up to double the full rate of council tax on second homes came into force in April 2024.
And in April 2023, the maximum level at which local authorities in Wales could set council tax premiums on second homes and long-term empty properties increased to 300%. Find out more in our guide on Second home council tax. Check your local council’s website for more information on council tax.
Do I pay Capital Gains Tax when buying a property?
No, capital gains tax only applies when you sell an asset that has increased in value since you bought it. Usually, when you sell your main home (or only home) you don’t have to pay any capital gains tax (CGT) due to private residence relief.
What are the other costs of buying a house?
There are a number of other costs you’ll need to budget for when buying a house including:
Conveyancing fees: The cost of the legal side of buying your house varies but average fees when buying a house typically cost up to £1,800.
Survey costs: The costs depend on your property size, location and what type of survey you choose. A basic RICS Level 1 Home Survey typical costs from £300-£900 while a RICS Home Survey Level 3, also known as a full structural survey typical costs from £630 – £1500.
Mortgage arrangement fees: Lenders often charge arrangement fees to access the best mortgage rates and these could be up to £1,500. Sometimes it’s worth paying a higher arrangement fee to get a lower mortgage rate but not always. So speak to a fee-free expert mortgage broker, they’ll crunch the numbers for you to find you the best mortgage deal overall.
Mortgage valuation fees: Your mortgage lender will also want to conduct a mortgage valuation survey to confirm that the property is worth what you’re paying for it. However, some mortgage deals offer free mortgage valuations.
Removals costs: The average UK removals cost is £928 for a three bedroom house. The easiest way to cut costs is to shop around. Find out how to do this in our guide How much do removals cost?
Home Buyer protection insurance: This can enable you to claim back some of your conveyancing fees, survey costs/mortgage valuation fees and mortgage/lender fees in the event of the purchase falling through. Home Buyer Protection Insurance costs from £69.
Article from HomeOwners Alliance - Written by Angela Kerr
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