Effective immediately, first homebuyers in England and Northern Ireland looking to purchase a home for £300,000 or less will no longer have to pay stamp duty. Before this budget change, first-time buyers would have to pay up to £5,000 in Stamp Duty Land Tax (SDLT). For properties up to £500,000, first-time buyers will now only have to pay stamp duty tax on the last £200,000 at a rate of 5 per cent.[1] Properties above £500,000 will remain unaffected by these changes.[2]

For those looking to step onto the property ladder for the first time in Wales, these changes will only take effect until the end of March 2018.[3] In Scotland, which operates under a separate land tax system, residents will have to wait for the Budget announcement on 14 December from Finance Secretary Derek Mackay.[4]

Mr Hammond said these changes to stamp duty thresholds were introduced to “…revive the home-owning dream in Britain”, adding that the stamp duty cut would affect 95 per cent of all first-time buyers and that 80 per cent of first-time buyers would end up paying no stamp duty at all.[5]

Mr Hammond made a decision to make this a permanent relief, rather than follow the path of formally implemented stamp duty holidays, because “that would only help those ready to purchase now. [Sic] And would offer nothing for the many who will need to save for years”.[6]

The Office for Budget Responsibility (OBR) said that existing homeowners are the group most likely to benefit from stamp duty exemptions, though, rather than first-time homeowners. According to their analysis, introducing a relief has historically only served to increase house prices – in this case, there is a predicted 0.3 per cent rise.[7]

Her Majesty’s Revenue and Customs (HMRC) have previously arrived at the same conclusion after an evaluation part way through a stamp duty holiday. It was concluded that the relief led to higher house prices and that it “has not had a significant impact in terms of improving the affordability of residential property for FTBs” (first-time buyers).[8]

As part of this Autumn Budget change, it is estimated that a further 3,500 first homeowners will enter the property market. According to British Bank Halifax, the average stamp duty charge across the UK is £1,654.[9] 

As part of Mr Hammond’s Budget to “…build a Britain fit for the future”, a number of other property changes were also announced, such as the continuation of the help-to-buy scheme with a further £10 billion investment to extend it to 2021 and a commitment to back the National Infrastructure Commission’s vision to build up to one-million homes by 2050.[10]

To find out more about what these changes to stamp duty rates for 2017 and beyond may mean for you, contact your local QualitySolicitors’ property law specialists on 0808 250 2205.

 

Sources:

[1] Office for Budget Responsibility, ‘A new tax relief for first-time buyers’ (accessed 23 November 2017) .

[2] Brian Milligan, ‘Budget 2017: What does the stamp duty change mean?’ BBC News (United Kingdom) 22 November 2017 .

[3] Ibid.

[4] Scottish Government, ‘Budget date announced’, 22 September 2017 .

[5] Philip Hammond, ‘Budget 2017 speech in full: Text and video of Philip Hammond's fiscal announcements on tax, the NHS and housing as it happened’ Mirror (United Kingdom) 22 November 2017 .

[6] Ibid.

[7] Office for Budget Responsibility, ‘A new tax relief for first-time buyers’ (accessed 23 November 2017) .

[8] Office for Budget Responsibility, ‘A new tax relief for first-time buyers’ (accessed 23 November 2017) .

[9] Brian Milligan, above as n 2.

[10] Philip Hammond, above as n 5.