Clare Hallett is conveyancing partner at Frettens
The government have announced a cut in stamp duty land tax, as unveiled by the chancellor Kwasi Kwarteng on Friday.
But what does this mean for homebuyers, first-time buyers and those in the middle of a transaction?
What is the stamp duty cut?
The Chancellor Kwasi Kwarteng announced a stamp duty reduction as part of an emergency ‘mini budget’ on 23rd September 2022, which aims to “support growth, increase confidence and help families aspiring to own their own home”.
The cuts unveiled are as follows:
• Currently, home buyers don’t pay any stamp duty on the first £125,000 of a property’s value. This will be doubled to £250,000
• First-time buyers currently pay no stamp duty on the first £300,000, this threshold will also be increased to £425,000
• The value of property on which first-time buyer can claim relief will increase from £500,000 to £625,000
How long will the stamp duty cut last?
The Chancellor continued: “The steps we have taken today, mean that 200,000 more people will be taken out of paying stamp duty altogether. This is a permanent cut to stamp duty effective from today.”
Given the increase in property values I think the increase in the nil rate band is long overdue. The announcement that it is permanent will also be a huge relief to both the public and conveyancers!
What does the stamp duty cut mean for homebuyers?
The cut means that homebuyers will no longer pay stamp duty on the first £250,000 on a property’s purchase price.
This will obviously have a positive impact on a large number of homebuyers.
Whilst the cut in the nil rate band will be welcome interest rates are rising and thus mortgages are more expensive. We need some stability and measured and sustainable growth in the property market whether the measures alone announced will achieve that remains to be seen.
How does the stamp duty cut affect first-time buyers?
The stamp duty cut, again, will likely have a big positive impact on the majority of first-time buyers.
First-time buyers who are buying a home for £425,000 or less are now exempt from paying stamp duty land tax.
And first-time buyer will now be able to claim relief on homes worth up to £625,000.
How does the stamp duty cut affect ongoing transactions?
Anything which completes on Friday and onwards will have the benefit of these cuts, which are permanent.
Sadly, if you completed last week before then you cannot reclaim any of the tax that you have paid.
Will the stamp duty cut really have a positive impact?
Criticism of the stamp duty cut has already started, with Shadow Chancellor of the Exchequer Rachel Reeves questioning the benefits of the reduction:
“It’ll take much more than a stamp duty cut to get our country back on track, and home ownership back to the levels last seen under a Labour government…”
“Last time the government did it (a stamp duty cut), a third of the people who benefited bought a second home or a buy to let property…”
“Is that really the best use of taxpayers’ money, when borrowing and debt is already so high?”
However I think raising the nil rate band is long overdue and will mean that some pay no SDLT at all, and other pay less than they would have last week.
We are working hard to make sure that we can implement the changes quickly for our clients, particularly those that have exchanged and not yet completed and who will benefit from the announcement.