The chancellor is set to scrap the lower stamp duty threshold for first-time buyers set out in the Liz Truss mini-Budget.

Rachel Reeves is expected to lay out the policy in her 30 October Budget, which will cost housebuyers up to £2,500, according to a report in the Times.

She will confirm that the government will not extend the increase to the threshold, which will end next March, at which these buyers start paying stamp duty.

Under temporary measures, first-time buyers currently pay no stamp duty tax for home purchases under £425,000, this was raised from £300,000 as part of the mini-Budget in September 2022. It is one of the few measures that remains from that fiscal event.

The move is expected to raise £1.8bn a year by 2029-30.

The approach will particularly affect buyers in London and the South East, where the average price of a home is £694,906 and £483,780, respectively, according to the latest Rightmove data.

Stamp duty is not liable for any home under £250,000.

The typical cost of a FTB home across the country is £226,868.

The measure will disappoint the homebuying industry.

Earlier this month, UK Finance said in its Budget submission that “the nil rate band of £425,000 for FTBs should be made permanent,” in a bid to boost industry activity and encourage UK growth.

The banking body added that all stamp duty bands should be increased annually in line with the UK house price index.

Stamp duty on primary residencies is charged at 5% of the purchase price for homes between £250,000 and £925,000, 10% for properties between £925,001 and £1.5m and 12% above that.