UK housing taxes will negatively affect buyers
In April 2025, new UK housing taxes came into force. The revised legislation has raised concerns among analysts. In their opinion, the changes will reduce the demand for local properties from foreign buyers.
The main changes were an increase in stamp duty and the removal of tax relief for foreign investors. In particular:
1. Reducing the limit for first-time buyers to £300 thousand. Previously it was £425,000.
2. For other categories of buyers, the levy will be £125 thousand. Before, the levy was £250 thousand.
Such changes will have a negative impact on people buying their first home. The additional costs for certain categories of buyers could run into tens of thousands of pounds. This will depend on the value of the property and the region.
The Financial Times believes that changes to UK tax policy could lead to a reduction in activity in the property market. The new rules will primarily affect vulnerable groups of consumers. These include young people looking to buy their first home. Moreover, delays in the transaction process lead to extra costs. The longer you wait, the higher the cost.
Another innovation is the abolition of non-domicile status. This allowed expatriates to avoid paying tax in the UK on income earned abroad. Now, anyone who has lived in the country for 10 years or more and is not a resident must pay a charge. And the tax is calculated on all property, regardless of its location or jurisdiction of registration. This policy could cool foreign investors’ interest in the local market.
According to Nathan Emerson of Propertymark, the current tax policy is notable for its unbalanced approach. As a result, the most vulnerable groups in society are under the most pressure. One possible step to reduce the negative impact could be to extend tax incentives. However, the government is not currently considering such an option.
UK real estate market trends overview
The situation is exacerbated by rising house prices, which have been increasing for several months in a row. The situation in the housing sector is as follows:
1. The average value of a house in the UK rose by 0.4% in February 2025. It amounted to £270,493.
2. In January 2025, the total number of transactions was 95,110 contracts. The figure is 14% higher than the result of the same period in 2024.
At the same time, the market is suffering from a lack of supply. As Knight Frank’s forecast only 50% of planned projects will be ready by 2025. Initially, 300 thousand houses were to appear on the market. The reason for this is the reduction of incentives for developers of affordable housing and the tightening of regulatory rules. This trend is making it more difficult to achieve the targets set by the UK government. It had planned to build 1.5 million homes within 5 years.