In his announcement of the mini-budget this morning, Chancellor Kwasi Kwarteng has confirmed that cuts to stamp duty land tax are being made with immediate effect.
The new regime is as follows:
- As of today, there is no stamp duty payable on the first £250,000 of a property purchase, up from £125,000.
- There are two changes affecting first-time buyers:
- The threshold where stamp duty becomes payable has been raised from £300,000 to £425,000.
- The special rate for first-time buyers was previously available for properties with a purchase price up to £500,000. This has now been raised to £625,000.
These changes are adopted in an effort by the Government to boost the economy. The Tax Payers’ Alliance has tweeted its support of reducing stamp duty and quotes research it conducted in 2019: “Raising the SDLT threshold from £125,000 to £1 million would result in an estimated 220,000 more transactions over the coming year, equivalent to a 31 percent increase.”
The Adam Smith Institute goes further, with tweets calling for the tax to be removed altogether: “Britain should abolish SDLT to boost productivity, growth and employment.”
Today’s cuts will also be welcomed by buyers who stand to make a saving on their purchase after a period of massive house price growth. But Andy Sommerville, Director of Search Acumen, warns that those who take advantage now may find their housing costs becoming unaffordable further down the line: “[B]uyers do need to be aware that savings they make today through SDLT may be cancelled out through elevated mortgage repayments in years to come due to elevated house prices and borrowing rate rises.” (Inside Conveyancing reports)
It remains to be seen whether a permanent reduction to SDLT will have the same stimulating effect on the market as could be seen during the previous stamp duty holiday where buyers rushed to meet the deadline. It is also unclear whether the new reduced threshold will be enough of an incentive to encourage more transactions on its own. This is especially when the property market is already held back by a shortage of supply, and a further increase in demand is likely to drive prices up even further.