The chancellor has scrapped stamp duty on property purchases of up to £300,000 in a bid to boost the first-time buyer market. Graham Ireland explains the implications.
Philip Hammond’s recent budget contained good news for first-time home buyers – they no longer have to pay stamp duty on properties costing up to £300,000, with immediate effect.
In addition, properties with a purchase price of up to £500,000 will require no stamp duty on the first £300,000.
With the property market facing the risk of a slow-down, the changes are welcome and we already have a number of clients who have benefited.
How the new system will work
To qualify for stamp duty exemption, buyers cannot previously have owned a property anywhere in the world and must intend to use the property as their home.
The chancellor says the new system will mean 95 per cent of first-time buyers will pay less stamp duty, with around eight in ten paying nothing at all.
With the exception of properties being bought as second houses, stamp duty is paid on all residential properties with a purchase price of over £125,000.
The duty is charged at a staggered rate above this threshold, beginning at two per cent and increasing in relation to the value of the property. Estimates suggest the changes will cost the Treasury £3.2bn over the next five years.
Not everyone is enthusiastic about the changes
However, while the changes are encouraging, they should not be seen as a complete solution to the first-time buyer problem.
The Office for Budget Responsibility (OBR) points out that the main ‘winners’ will be existing homeowners as opposed to first-time buyers because the OBR believes all house prices will increase by 0.3 per cent in the next 12 months due to the changes.
Regional variations play a key role
A study by estate agent Savills suggests the average UK stamp duty bill for first-time buyers is about £2,700, although first-time purchasers in many parts of the country will save much less.
In the North of England, average stamp duty is less than £12, according to analysts at AJ Bell. This is because the average house price in the North is only marginally above the stamp duty threshold of £125,000. For higher priced homes, though, first-time buyers paying £500,000 for a property could save up to £5,000.
A move in the right direction
It should also be kept in mind that finding the money for a deposit is a bigger hurdle than stamp duty for any first-time buyer. Figures from the Halifax indicate that the average deposit in the UK is almost £33,000 – substantially more than the average stamp duty charge of £1,654.
Even so, the new measures to reduce stamp duty represent a timely seasonal fillip for people looking to buy their first home as we approach the New Year.
For more information on the stamp duty changes, or any information on purchasing a home, contact Graham Ireland on 01254 272640 or email him at graham.ireland@whnsolicitors.co.uk
