September Budget Announces Stamp Duty Cuts

This morning, newly appointed Chancellor Kwasi Kwarteng announced a mini-budget aimed at tackling the cost of living crisis and equipping the British public to tackle rising inflation. One of the most important aspects of the aforementioned budget was Kwarteng’s cut to Stamp Duty – but what does this mean for home movers, and will it make your next property move more affordable?

What is Stamp Duty?

Stamp Duty Land Tax is a payable sum of tax based upon the value of a purchased property. The tax is banded, with more expensive purchases warranting higher percentages of tax up to 12 per cent of the purchase price. This is payable for the purchase of freehold properties, leasehold properties, commercial units, buy-to-let investments and shared-ownership units. Until September 30^th 2021, there was a Stamp Duty relief scheme in place to help alleviate the tax burden on property purchases, but this has since ended, thereby increasing the amount of tax payable on property purchases – until today!

What are the new Stamp Duty cuts?

The new government’s Growth Plan is intended to “help more people move, promote residential investment and boost first-time ownership” as quoted by HM Treasury. The amends ensure that first time purchasers only pay Stamp Duty Land Tax on purchases worth over £425,000, which is a huge boundary increase from the £300,000 maximum that was previously instated. All other buyers, regardless of whether they have previously purchased or owned a property, will also benefit from having no Stamp Duty to pay on properties up to the first £250,000, which has doubled from the previous limit of £125,000. Upon announcing the changes, Kwarteng stated that “200,000 more people will be taken out of paying stamp duty altogether”, before adding that this was a “permanent cut”.

What do the Stamp Duty cuts mean?

In brief, the new cuts to Stamp Duty mean that all buyers will receive some form of financial relief when purchasing property. The new Stamp Duty boundaries are as follows:

• Up to £250,000: No SDLT
• From £250,001 to £925,000: 5 per cent
• From £925,001 to £1,500,000: 10 per cent
• Over £1,500,000: 12 per cent

For example, if you purchased a property worth £295,000, you would pay no Stamp Duty on the first £250,000. The remaining £45,000 incurs a tax of 5 per cent, which is £2,250. Before now, purchasers would have paid Stamp Duty on anything over £125,000, allowing purchasers to save a hefty amount of money that would previously have been deemed taxable. As well as the obvious financial implications that the Stamp Duty cuts will bring to anyone considering purchasing a first property or moving home these Stamp Duty changes may mean that current and potential property sellers could see more demand in the market as buyer look to capitalise on the new savings, potentially giving sellers an advantage in the immediate term. Whilst many are agreed that these actions will provide a boost to the UK’s housing market Centrick’s Andy Butts told us

House prices across the Midlands have risen by 12.7% in the last 12 months and these cuts will be welcome news for many first time buyers with significant savings on first and chain moves, enabling more people to either move property more affordably or take their first step on the ladder. This is great news for the housing market and in particular the average house buyer. With the average price of a house in England current sitting at £312,000, Under the new rates you would pay a total of £3,100 in stamp duty for this property – this is down from £5,600 under the previous rate. It's also a massive boost for the investor market. With many landlords not wanting to re-invest due to increased tax in many areas, this may just be the encouragement they require to commit to increasing their portfolios. The “Stamp Duty Holiday” the government introduced back in the summer of 2020 was a huge success and was widely thought to have stimulated the housing market. The government are clearly a little nervous around the impact of cost-of-living crisis, along with recent base rate increases impacting the mortgage market and are looking at ways to prevent a property market crash. Overall I believe this is a very positive step for the housing market and one which first time buyers and the lower end of the property market will be very happy with.

What else does the budget say about property?

The chancellor also announced this morning that the nil-rate band has been doubled up to £250,000 for those inheriting deceased estates, and that first time buyers relief is now available for purchases up to £625,000, which is up from the previous £500,000. Second home owners and additional rates of SDLT remain unchanged which will see the surcharge for additional properties remain at 3%.

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