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…

Savings: Homebuyers celebrate after consultant Kwasi Quarting took an ax to stamp fees on his mini-budget on Friday

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 does that mean for home prices?

The stamp duty cut is likely to increase activity in the housing market as it puts homeownership within the reach of more first-time buyers.

Some experts warned that the move could push home prices higher.

says Pete Mugleston, managing director of OnlineMortgage

However, this is a relatively short-term solution to the current issues in the housing market.

“The risk is that these measures can exacerbate inflation and increase home prices further, making it difficult for first-time buyers to purchase a property long-term.”

Stamp duty holidays in the past have overheated the real estate market and contributed to higher prices. An offer made by Rishi Sunak in 2020 when he was a consultant helped prices increase by an average of 8.5 per cent – the highest increase in some years.

The reaction to Friday’s cut is likely to be different because it is permanent with no deadline for buyers to scramble to complete it.

The boost from the stamp duty cut will be set off against a number of other factors working against the real estate market.

Mortgage rates are rising, which leads to lower affordability. Prices have risen at a rate that many see as unsustainable.

The average home value rose by £39,160 – or 15.5 per cent – last year to £292,118, according to the Land Registry. Along with the stamp duty announcement on Friday, the chancellor committed to speeding up construction of new homes, which would help make housing more affordable by increasing supply.

Later this fall, he said, the government will put in place a plan to “open up homeownership to a new generation by building more homes where people want to live and work.”

This will include the sale of surplus land owned by the government.

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”

Boost: Nicola Wordsworth is going to put the savings into her dog shampoo company

Boost: Nicola Wordsworth is going to put the savings into her dog shampoo company

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.”

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