Enjoying first time buyers – better off for up to £11,250

Homebuyers are celebrating after councilor Kwasi Quarting took an ax to stamp fees on his mini-budget on Friday.

Movers will save up to £2,500, and 200,000 homebuyers each year will pay no stamp duty at all.

In addition to putting money back into buyers’ pockets, Kwarteng said he hopes the move will “support growth, increase confidence, and help families aspiring to own their own home.”

Here’s how it will work…

What will homebuyers pay from now on?

As of last Friday no stamp duty has been paid on the first £250,000 of the property price. This is a 100 per cent increase over the previous limit of £125,000.

Other bands remain unchanged. This means that any amount over £250,000 is taxed at 5 per cent, until the 10 per cent threshold reaches £925,000.

This 10 per cent rate is paid from £925,000 to £1.5m, and anything over that attracts a 12 per cent stamp duty.

The reductions mean that someone buys a home that costs an average UK £290,000, so their bill will drop from £4,500 to £2,000.

Advisers have announced so-called stamp duty holidays in the past – time-limited cuts to boost the economy and prop up the housing market. The latest announcements were made by former chancellor Rishi Sunak during the pandemic. But this change is permanent.

What about first time buyers?

First time buyers have already taken advantage of an additional benefit, which means they don’t pay stamp duty on the first £300,000 of their home. This amount has been raised to £425,000.

Furthermore, the value of the property that first time buyers can claim for relief has been raised from £500,000 to £625,000. This means they can save up to £11,250 thanks to the changes.

First time buyers in the most expensive parts of the country such as London and the South East will benefit the most.

When do the changes take effect?

Anyone who completed the purchase of a property after the announcement on Friday will benefit from the lower prices.

Buyers have 14 days from the point they complete their purchase to file a return with Revenue and Customs and pay any applicable stamp duty.

Does it affect the whole UK?

No, it only affects buyers in England and Northern Ireland.

Scotland and Wales have their own property taxes. Land Transaction Tax (LTT) replaced stamp duty in Wales in 2018. It applies to properties over £180,000.

In Scotland, buyers pay Land and Building Transaction Tax (LBTT) and it applies to properties costing over £145,000 – or over £175,000 for first time buyers. The Scottish government said last week that it would draw up plans for LBTT “as part of the regular budget process”.

Will landlords also benefit from discounts?

Owners – and anyone who buys another home – still have to pay an additional 3 percentage points in stamp duty on property purchases.

But they will benefit from the increase to the minimum at which the stamp duty is paid. From Friday, they will pay 3 per cent tax on the first £250,000, 8 per cent between £250,000 and £925,000, and so on.

What do homebuyers say about the cut?

“We wish you’d been more generous”

Owen Williams, 41, is a payroll supervisor and lives in Surrey with his wife and two children. The family is on the move because they have outgrown their home.

“Our three-bedroom house just isn’t big enough for us—I can barely fit into the third bedroom,” Owen says. The family buys a five-bedroom house they fell in love in south London for £850,000.

“It’s the worst house on the best street,” Owen says, “but we’re planning a great deal of work on it.”

We had hoped the stamp duty cut would be more generous, as we only have £2,500 in savings. If we had saved more, we would certainly have spent it on renovations, which we will now have to wait until at least next year.

“Tax cut means I can invest more in my business”

Nicola Wordsworth, 55, was delighted to hear that the threshold for stamp duty had been raised. She is selling her two-bedroom flat in Hatfield, Hertfordshire, and buying a two-bedroom bungalow on the Kent coast between Margate and Whitstable.

She had expected to have to pay £7,000 in stamp duty on her purchase of £340,000, but her bill was reduced to only £4,500, immediately saving her the maximum possible sum of £2,500.

Nicola plans to invest some savings in her new startup, Pup Suds, which makes and sells handmade shampoo bars for dogs. It will be a great help, she says. I am moving to Kent to save money and lowering the stamp duty would help tremendously, although it would have been nice to eliminate it entirely.

“But it’s a good chunk of the money so I’m very happy.”

‘I hope lowering stamp duty will boost the market’

First-time buyer Kieran Melton, 31, director of pathology for the NHS, has just received and accepted an offer for a two-bedroom flat in Winchester, which he has been renting.

Kieran buys a £290,000 flat with Evin-style mortgage lender Help To Buy, who have paid two-thirds of his deposit. He’s already found somewhere below the stamp duty limit, but he hopes he can benefit from the long-term boost the cut creates in the real estate market.

I hope to add value to where I buy myself because there is a lot of work that needs to be done. But raising the threshold for stamp duty will help even more,’ he says.

I am still paying £25,600 in stamp duty

Lee Hamilton, 40, is moving with his wife and daughter from Worthing to another home along the West Sussex coast.

Lee, who works in QA, and his family are set to complete their three-bedroom family home near the waterfront. The tax cut would save them £2,500.

He tells me, “Saving is an appreciated bonus we didn’t expect, which we would likely spend on the washing machine and lawn mower.

However, it will not help much with the cost of living.

“We still have to pay £25,600 in stamp duty, money we would have invested back into the economy by renovating the property.”