The Chancellor, Kwasi Kwarteng, has confirmed a permanent stamp duty cut, with no tax payable on properties up to a value of £250,000.
Kwarteng announced the policy in a mini-budget on Friday, almost a year after the last stamp holiday ended. He also raised the threshold for first-time buyers to £425,000. Here we explain the changes in their entirety.
What is stamp duty and how does it change?
Stamp duty is a tax paid by home buyers in England and Northern Ireland, based on the value of the property they are buying. The government has announced a permanent change to how the tax works, with the threshold at which buyers must pay the levy rising from £125,000 to £250,000.
Previously, the first £125,000 of a property’s value was tax-free. Buyers were then charged 2% of the value of the property above this threshold up to £250,000, and 5% on the portion between £250,001 and £925,000.
Under the new system, the first £250,000 of a property’s value will be exempt, and buyers will pay 5% of the value of the home from £250,001. The portion between £925,001 and £1.5m will still be taxed at 10% and any property worth more than that will be subject to stamp duty rates of 12%.
The level at which first-time buyers must pay stamp duty will rise from £300,000 to £425,000 in a move to boost home ownership. Under the plans, the first-time buyer’s exemption would apply to properties worth up to £625,000, compared to the current £500,000.
What are the rules in Scotland and Wales?
A similar tax is paid in Scotland and Wales, but the rules and thresholds are different. In Scotland, it is called transaction tax for land and buildings, and is not payable on the first £145,000 of a property’s value.
Meanwhile, in Wales, the levy is called Land Transaction Tax, which is payable on properties over the value of £180,000. As the tax is passed on, the Scottish and Welsh Governments will receive funds to distribute “as they see fit”, the Treasury said Today.
Scotland and Wales introduced their own tax cuts when stamp duty in England and Northern Ireland was announced in 2020.
I’m about to buy a property – what does it mean for me?
People in the process of buying a property should take advantage of the tax break when it comes into effect on Friday. Contact your attorney to make sure you get the discount.
What do the experts say about the changes?
Reaction from property experts has been mixed, with some saying it will ease cost pressures on buyers in the short term, while warning it will push up house prices.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The horrendous cost of buying a house just got cheaper – at least for now.
“Although the change is persuading more people to buy, a lack of buyers is not the biggest problem facing the property market. The real drag on the property market is a severe lack of supply, because the average agent only has 36 properties on their books.”
But Tim Bannister, Rightmove’s housing expert, said that while it could lead to some “unseasonal price increases over the next few months”, the permanent change could mean the increase in demand is slower than the temporary cut in 2020. “In addition, buyers may save money. up to £15,000 during the temporary stamp duty holiday, while the savings are lower with this change, he said.
“The threshold change for first-time buyers means we could see more first-time buyers who can afford to make the jump to a bigger home as their first move.”