Joy for first time buyers: best up to £11,250

Home buyers are celebrating after Chancellor Kwasi Kwarteng scrapped stamp duty in his mini-budget on Friday.

Moving companies will save up to £2,500 and a further 200,000 homebuyers each year will pay no stamp duty.

As well as putting money back in buyers’ pockets, Kwarteng said he hoped the move would “support growth, boost confidence and help families aspiring to own their own homes.”

This is how it will work…

Savings: Home buyers are celebrating after Chancellor Kwasi Kwarteng took an ax for stamp duty in his mini-budget on Friday

How much will homebuyers pay from now on?

As of last Friday, stamp duty is not payable on the first £250,000 of a property’s price. This is a 100 per cent increase from the previous threshold of £125,000.

The other bands remain unchanged. That means anything over £250,000 is taxed at 5 per cent, until the 10 per cent threshold kicks in at £925,000.

This 10 percent fee is paid from £925,000 up to £1.5 million, with anything above that rate incurring a 12 percent stamp duty.

The cuts mean someone buying a house with an average UK cost of £290,000 will therefore see their bill reduced from £4,500 to £2,000.

Chancellors have in the past announced so-called stamp duty holidays – time-limited cuts to boost the economy and support the housing market. The most recent was announced by former Foreign Minister Rishi Sunak during the pandemic. But this change is permanent.

What about first time buyers?

First-time buyers already benefited from an additional benefit, which meant they did not pay stamp duty on the first £300,000 of their home. This has been raised to £425,000.

Additionally, the value of property on which first-time buyers can claim compensation has been raised from £500,000 to £625,000. That means they could save up to £11,250 thanks to the changes.

First-time buyers in the more expensive parts of the country, such as London and the South East, will inevitably benefit the most.

When do the changes take effect?

Anyone who completed a property purchase after the announcement was made on Friday will benefit from the lower rates.

Buyers have 14 days from the time they complete a purchase to file a declaration with Revenue and Customs and pay any stamp duty due.

Do they affect the whole of the UK?

No, they only affect buyers in England and Northern Ireland.

Scotland and Wales have their own property taxes. Land Transaction Tax (LTT) replaced stamp duty in Wales in 2018. It applies to property worth more than £180,000.

In Scotland, buyers pay Land and Building Transactions Tax (LBTT) and it applies to properties costing more than £145,000, or more than £175,000 for first-time buyers. The Scottish government said last week it would set out LBTT plans “as part of the normal budgeting process”.

Will homeowners also benefit from the cuts?

Homeowners, and anyone buying a second home, will still have to pay an additional 3 percentage point stamp duty surcharge on property purchases.

But they will still benefit from the increased threshold at which stamp duty is paid. Starting Friday, they will pay 3 percent tax on the first £250,000, 8 percent between £250,001 and £925,000, and so on.

What will it mean for house prices?

The stamp duty cut is likely to increase activity in the housing market as it puts home ownership within the reach of more first-time buyers.

Some experts have warned that the move could push house prices even higher.

Pete Mugleston, Managing Director of OnlineMortgageAdvisor, says: ‘These measures will make it easier to access property, increasing mortgage options for many people.

‘That being said, this is a relatively short-term solution to the current problems in the housing market.

“The risk is that these measures could worsen inflation and drive home prices even higher, making it more difficult for first-time buyers to buy a property in the long run.”

Stamp duty festivities in the past have heated up the property market and contributed to rising prices. The one introduced by Rishi Sunak in 2020 when he was chancellor helped raise prices by an average of 8.5 percent, the highest increase in some years.

The reaction to Friday’s cutoff is likely to be different, as it is permanent and has no deadline for buyers to rush to complete.

The momentum of the stamp duty cut will be weighed against a number of other factors working against the property market.

Mortgage rates are rising, leading to lower affordability. Prices have been rising at a rate that many see as unsustainable.

The value of an average house rose by £39,160, or 15.5 per cent, last year to £292,118, according to the Land Registry. Along with Friday’s stamp duty announcement, the Chancellor pledged to speed up construction of new homes, which should help make housing more affordable by increasing supply.

He said that later this autumn the government would set out a plan to “unlock home ownership for a new generation by building more homes in the places where people want to live and work.”

This will include the sale of surplus land owned by the Government.

What homebuyers are saying about the haircut

“We expected him to be more generous”

Owen Williams, 41, is a payroll supervisor and lives in Surrey with his wife and two children. The family is in the process of moving as their home is too small for them.

“Our three-bedroom house isn’t big enough for us; I can barely get into the third room,” says Owen. The family is buying a five-bedroom house they fell in love with in south London for £850,000.

“It’s the worst house on the best street, but we’re planning a lot of work,” says Owen.

‘We had hoped the stamp duty cut would have been more generous as we are only saving £2,500. If we had saved more than that, we definitely would have spent it on renovations, which will now have to wait until at least next year.”

‘The tax cut means I can invest more in my business’

Boost: Nicola Wordsworth will put the savings into her dog shampoo firm

Boost: Nicola Wordsworth will put the savings into her dog shampoo firm

Nicola Wordsworth, 55, was delighted to learn that the stamp duty threshold was being lifted. She is selling her two-bedroom flat in Hatfield, Hertfordshire, and buying a two-bedroom bungalow on the Kent coast, between Margate and Whitstable.

He expected to have to pay £7,000 in stamp duty on his £340,000 purchase, but his bill dropped to just £4,500, instantly saving him the maximum £2,500 possible.

Nicola plans to invest some of the savings in her new company, Pup Suds, which makes and sells handmade dog shampoo bars. She says: ‘It will be a great help. I am moving to Kent to save money and the reduction in stamp duty will help me enormously, although it would have been nice if it was removed entirely.

“But it’s a lot of money, so I’m very happy.”

“I hope the stamp duty cut will boost the market”

First-time buyer Kieran Milton, 31, an NHS pathology manager, has just accepted an offer on a two-bedroom flat in Winchester, where he has been renting.

Kieran is buying a £290,000 flat with Help To Buy-style mortgage lender Even, who put up two-thirds of his deposit. He had already found a place below the stamp duty ceiling, but hopes to benefit from the long-term boost the cut creates in the property market.

‘I’m hoping to add value to the place I’m buying because there’s a lot of work to be done. But raising the stamp duty threshold will help even more,” she says.

‘I’m still paying £25,600 in stamp duty’

Lee Hamilton, 40, moves with his wife and daughter from Worthing to another house on the West Sussex coast.

Lee, who works in quality control, and his family must complete construction of the three-bedroom family home near the waterfront. The tax cut will save them £2,500.

Says Lee: ‘The savings are an appreciated bonus that we didn’t expect, which we’ll probably spend on a washing machine and a lawn mower.

‘However, it’s not going to help much with living costs.

“We’re still going to have to pay £25,600 in stamp duty, which is money we would have reinvested in the economy by renovating the property.”

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