What is Stamp Duty?
Stamp Duty Land Tax (SDLT) is the tax that must be paid when you purchase a property or a piece of land. The amount of money required for stamp duty depends on the overall price of the property as well as factors like whether it is residential or non-residential and whether or not you are a First Time Buyer.
How much will first time buyers save in tax?
There’s more great news for first time buyers. The old threshold at which stamp duty was paid for first-time buyers was £300,000 but this has increased to £425,000. The Chancellor has also increased the value of the property on which first time buyers can claim relief, from £500,000 to £625,000.
The changes come into effect immediately. This means that buyers who are completing purchases this week should be able to benefit from the tax cuts. The changes to the first-time buyer rates will really help buyers in London and the surrounding areas, where high house prices consistently mean even first stopper properties are hit with significant tax bills.
How much would you have paid in Stamp Duty previously?
If the property was worth between £125,001 and £250,000, the stamp duty land tax rate was 2%. So if the property was valued at £250,000, you would have had to pay an extra £2,500 in stamp duty tax.
For the next £675,000, the rate was 5%. If the property you are purchasing was valued between £250,001 and £925,000 bracket, the buyer will not pay any stamp duty on the first £125,000 but would have paid a 2% rate on the next £125,000 and a 5% rate on the following £675,000.
First-time buyers in England and Northern Ireland were always required to pay stamp duty. However, it didn’t apply to the first £300,000 of a main residential property if it costs less than £500,000.
In Wales, first time buyers are still exempt from land transaction tax on the initial £180,000 of their home. In Scotland, first time buyers don’t have to pay land and buildings transaction tax on the first £175,000 of the sale.
Are there any changes that landlords should be aware of?
Mr Kwarteng did not announce any changes to the remaining tax bands and he didn’t announce any changes to the additional homes surcharge, so that will remain at three percentage points.
Should stamp duty be scrapped altogether?
For people moving home, the stamp duty tax has become notoriously unpopular and, in recent years, several leading economists have spoken out against it, citing it as counterintuitive as it prevents people from moving to secure better-paid work, older generations from downsizing and homeowners from climbing the property ladder.
Currently, the Government has not expressed plans to completely scrap the tax, however, these tax changes are a first step to getting younger people onto the property market.