The level at which stamp duty starts being charged doubled last week. This will save some home buyers thousands of pounds. Chancellor Kwasi Kwarteng announced that SDLT would not be charged on the first £250,000 of a property purchase for people moving home. This has risen from the current level of £125,000. Furthermore, to help people get on to the property ladder, no stamp duty will be paid on the first £425,000 of a property worth up to £625,000 for first-time buyers. (The new threshold only applies in England and Northern Ireland, as Scotland and Wales set their own property transaction taxes). Get a quick conveyancing quote with Conveyancing Store. No Hidden Fees, Get Moving Today.
In a nutshell, here are the key points:
- The level at which stamp duty begins has been doubled from £125,000 to £250,000
- First-time buyers start paying the tax on properties costing £425,000 or more on homes costing up to £625,000
- Home-movers in the lower price brackets will save up to £2,500.
- First time buyers can save up to £11,250
- These changes see 8 million homes removed from stamp duty payments
- Greater changes are needed to offset the impact of higher mortgage rates
The changes came into force from midnight on Friday 23 September and are permanent. Based on the value of homes across England and Wales, it’s likely 8 million homes – 31% – will be taken out of stamp duty.
Who Will The New Stamp Duty Rates Benefit Most?
Kwarteng said: “Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots.”
The new rates are good news for the lower end of the housing market, especially first time buyers and those with a budget of up to £250,000. Also, areas where house price growth is already strongest, as values rise quickly off a low base, will benefit.
But the changes are less helpful for buyers of homes costing £250,000 to £925,000 who pay the higher 5% rate. This band has grown by 10% in the last year and includes 13.6 million homes.
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What Do The Experts Say?
Richard Donnell, Director of Research at Zoopla, said:
“We welcome today’s changes to stamp duty, which will significantly reduce barriers for first time buyers and support those at the lower end of the market.
“However, the reforms do little to reduce the burden for those at the middle to upper price bands, which account for almost half of all property sales.
“Stamp duty is starting to resemble income tax, where the more you earn the more you pay, especially if the bands don’t move.
“If we are to significantly mobilise the housing market, greater changes are needed to offset the impact of higher mortgage rates – particularly in London and the South East where house prices are highest and where higher mortgage rates will have the greatest impact in 2023.”
How Does This Help Economic Growth?
The mini budget aims to increase the country’s economic growth at a time when it is slowing down. The Bank of England has already warned that the UK may already be in recession.
The housing market is also showing signs of slowing, as consumers become more cautious in the face of rising interest rates and living costs.
The Chancellor hopes that cutting stamp duty will get the housing market moving again.
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What Will Happen To The Housing Market?
The previous stamp duty holiday, introduced by Rishi Sunak, led to a surge in activity. But this was partly because the cut was only temporary, providing an incentive to expedite purchasing decisions to benefit from the tax break.It was also more generous, with stamp duty waived on the first £500,000 of a property purchase. It also came as the Covid-19 pandemic triggered a once-in-a-lifetime reassessment of our housing needs.
But this time around the reduction is permanent, meaning people do not have a limited period in which to benefit from it.
A Potential slowdown?
Cutting stamp duty could this time even help offset a potential slowdown in the housing market; the Bank of England has raised interest rates, with the cost of borrowing expected to hit 4.5% next year, adding to the financial squeeze on homebuyers.
However, analysts said that without wider reforms, as well as efforts to boost housing supply, the measure would add to inflation and do little to benefit those struggling to get on the housing ladder.
The cuts don’t do much for those looking to buy in the £250,000 to £925,000 price band. This band has grown by 10% in the last year and includes 13.6 million homes.
Even so, the move has been welcomed by estate agents
Jeremy Leaf, a former RICS residential chairman, said: “The Chancellor clearly recognises the dangers in terms of reduced revenue from stamp duty, given the recent reduction in housing market activity, and has taken steps to boost the market.
“The stamp duty cut, particularly for first-time buyers, should encourage those at the first rung of the housing ladder to take the plunge, which will be good not just for the market but for job and social mobility across the board, as well as the wider economy.”
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What Are The New Stamp Duty Rates?
The new stamp duty rates for those buying a residential property are:
|Property price||Stamp duty rate|
|Up to £250,000||0%|
|£250,001 to £925,000||5%|
|£925,001 to £1.5 million||10%|
|£1.5 million and above||12%|
While someone who previously bought a home costing £250,000 would have paid £2,500, they will now not pay anything. Someone purchasing a £500,000 home will pay £12,500 rather than £15,000 .
The previous stamp duty bands were:
|Property price||Stamp duty percentage to pay|
|£0 – £125,000||0%|
|£125,000 – £250,000||2%|
|£250,000 – £925,000||5%|
|£925,000 – £1.5m||10%|
Other Housing News
The Chancellor also announced plans to boost the supply of housing through releasing more land for new build developments. This will be done through increasing the disposal of surplus government land for housing developments.
Kwarteng also said Investment Zones will be set up in 38 local authorities.These will have liberalised planning rules and targeted tax cuts to encourage the building of homes, In the past, the shortage of homes for sale has created a discrepancy between supply and demand, pushing house prices higher. Get a quick conveyancing quote in minutes.