A stamp duty cut has been announced as part of the government’s mini-budget that could make it easier for those trying to buy a house.
Chancellor Kwasi Kwarteng said the tax cut - a second reduction to the stamp duty tax in two years - will “get the housing market moving” and ensure that 200,000 homebuyers every year do not need to pay the tax.
The move could be beneficial to those renovating a house, and those in the midst of buying or considering a move in the coming months, who can reinvest the savings into their project. The cut is also intended to make it easier for first-time buyers to climb on to the property ladder.
However it has been criticised by some who believe this will now lift house prices further and elevate competition for property.
How much is the stamp duty cut?
The threshold for stamp duty exemption in England and Northern Ireland has been lifted from £125,000 to £250,000.
For first-time buyers, who currently pay no stamp duty on the first £300,000, that figure will go up to £425,000. The government will also increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000.
The government announcement claims this means the standard buyer in England will save £2,500 on stamp duty.
The chancellor also announced New Investment Zones which will be used to release land for new homes in communities across the country.
Stamp duty is devolved in Scotland and Wales so this cut won't affect current thresholds, but the Scottish Government is expected to receive more than £600m in extra funding due to these changes, as well as a cut in income tax, while the Welsh Government will receive around £70m as a result of the stamp duty changes.
You can use the Stamp Duty Land Tax (SDLT) calculator to see how much stamp duty will be for a particular purchase.
What is stamp duty?
The Stamp Duty Land Tax (SDLT) is a tax paid when you buy a property in England and Northern Ireland.
The amount of stamp duty you pay depends on several factors, including:
- Purchase price
- Whether the property will be your main residence
- When the purchase is made
- Whether you're a first-time buyer
How long will the stamp duty cut last?
Unlike the stamp duty holiday, which ran for one year, this is a permanent cut to stamp duty. The chancellor confirmed it takes place effective from midnight on Friday 23 September 2022.
Will this affect house prices?
House prices have soared during the last 18 months, although the pace of growth has finally started to slow over the summer. This new announcement, however, has some experts fearing a return to the red hot prices we saw following the introduction of the stamp duty holiday.
Nick Whitten, JLL UK Head of Residential and Living Research, said: “Just as the stamp duty holiday did, the new reduction in SDLT will boost homebuyer demand and underpin continued house price growth.
“Despite the increase in the first time buyer stamp duty exemption level, the likely house price growth that it will fuel could ultimately hurt those aspiring purchasers more than it helps them.”
Rightmove, the property website, reported that within an hour of the announcement that traffic to the Rightmove website jumped by 10%.
Rightmove’s housing expert Tim Bannister said: “Demand has been softening over the last few months but [Friday’s] announcement is likely to stimulate some more demand.
"If it does lead to a big jump in prospective buyers competing for the constrained number of properties for sale then it could lead to some unseasonal price rises over the next few months.”
Could stamp duty be scrapped for first time buyers?
Paula Higgins, Chief Executive of HomeOwners Alliance, a property advice website and campaigning group, says they will continue to campaign for stamp duty to be scrapped entirely for first time buyers, but the stamp duty cut was a step in the right direction.
"The Chancellor's announcement is much needed great news for first time buyers. The government's changes to stamp duty mean more people will be able to afford to get on the property ladder. It's especially welcome at a time when interest rates are driving up the cost of borrowing. Government has also reaffirmed its commitment to homeownership today. We agree it is critical: homeownership shouldn't be for the richest in society, but achievable for everyone. This tax cut is a step in the right direction.
"The fact the change is permanent and starts today is particularly welcome as it will avoid the chaos of the previous stamp duty holidays. It means those who had put their move on hold earlier this week when speculation began can now crack on with their exchange and completion.
"The government has taken on board the recommendations of our study earlier this year which found almost a third more first-time buyers are having to pay stamp duty than they were five years ago. One in four of all first-time buyers now pay stamp duty. We are glad the government has listened and responded with reforms to the way the tax is applied to first time buyers."
