The Chancellor, Jeremy Hunt confirmed that the stamp duty cuts for homebuyers in England and Northern Ireland announced by former chancellor Kwasi Kwarteng on the 23rd of September 2022 will remain in place, but will be phased out from March 2025. What does a stamp duty cut mean for homebuyers? Lets take a look.
Budget 2022 – what the Chancellor said regarding the stamp duty cut
“Today’s statement is about homeownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society,” said Chancellor Kwasi Kwarteng. “To support growth, increase confidence and help families aspiring to own their own home I could announce that we are cutting stamp duty.
“In the current system, there is no stamp duty to pay on the first £125,000 of a property’s value.
“We are doubling that to £250,000. For first-time buyers (FTBs), who currently pay no stamp duty on the first 300,000 pounds, we’re increasing that threshold to £425,000.
“And we’re going to increase the value of the property on which FTBs can claim relief from £500,000 to £625,000.”
Jeremy Hunt said on the 17th of November that change would now be temporary, “Creating an incentive to support the housing market and the jobs associated with it by boosting transactions during the period the economy most needs it”.
What is stamp duty and when is it paid?
Stamp duty land tax (SDLT) is a tax a homebuyer is required to pay on a property or land in England and Northern Ireland.
How will the stamp duty cut work?
The threshold when you are required to pay stamp duty on a residential property has increased from £125,000 to £250,000.
The adjustments to stamp duty are as follows:
|Property Purchase Price||Stamp duty rate (% of purchase price)|
|Up to £250,000||Zero|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
The stamp duty cut when buying your first home
You can claim a discount (relief) if the property you buy is your first home. This means you’ll pay:
- no SDLT up to £425,000
- 5% SDLT on the portion from £425,001 to £625,000
You’re eligible if you and anyone else you’re buying with are first-time buyers.
Who does a stamp duty cut help?
The government has estimated that the reforms will spare an additional 200,000 households from paying any stamp duty each year, including 60,000 first-time buyers.
These are clearly significant numbers, it might be that the average first-time buyer in England will not save any tax. Their typical purchase price of £249,453 was already under the previous £300,000 threshold.
Those buying in expensive locations such as London and the South East will benefit. I’m sure this makes their deposit requirements look a little less daunting.
However, given the recent interest rate rise, it remains how significant the impact is.
A recent report from the Office of National Statistics (ONS) shows house prices increased 13.6% annually in August 2022.
These measures have been implemented by the Treasury with the hope of stimulating the housing market. From what I’m seeing from the market as a whole, we could actually do with a period of consolidation!
History suggests that cuts to SDLT result in prices going up even further, we’ll just have to wait and see how it plays out in reality.
I’ve always thought stamp duty was an unnecessarily cruel tax on first-time buyers. These tweaks are good, although personally, I’d like to see first-time buyers exempt from stamp duty entirely.
A word from the front-line
“The rebalancing of the thresholds for which stamp duty is paid, in particular for first time buyers is long overdue to catch up with house prices which have risen at an extraordinary rate.
“We did hope that stamp duty for downsizers or last time movers would have also been reviewed to release the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.”Nathan Emerson, CEO Propertymark
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Last Updated: November 17th, 2022