UK property investors and home buyers have something to be happy about following the mini-budget last Friday, 23 September 2022.
The Chancellor of Exchequer Kwasi Kwarteng announced last week that there will be a permanent stamp duty cut, with no tax to be paid on properties up to the value of £250,000. The stamp duty threshold for first-time buyers was also increased from £300,000 to £425,000.
This announcement aims to “support growth, increase confidence and help families aspiring to own their own home”.
But what does the stamp duty cut mean for UK property investors, first-time buyers or buyers in the middle of a transaction?
What Is Stamp Duty And How Has It Been Changed?
Stamp duty is a type of property tax paid by residential UK property investors and home buyers in England and Northern Ireland. It is based on the value of the property they are buying.
Stamp duty is paid when the property's value goes beyond the ‘nil rate band’. This is the cost threshold where one does not have to pay stamp duty unless the property is valued beyond the band.
Stamp duty is known differently depending on which country you are buying property in:
- In England and Northern Ireland, this tax is called Stamp Duty Land Tax (SDLT)
- In Scotland, it is called the Land and Buildings Transaction Tax (LBTT)
- In Wales, the equivalent is called the Land Transaction Tax (LTT).
When the government announced a permanent cut to the stamp duty, this nil rate band threshold increased from £125,000 to £250,000. Other changes include:
- UK property investors and home buyers now don’t have to pay stamp duty on the first £250,000 of the property they are purchasing.
- First-time home buyers do not have to pay stamp duty on the first £425,000. They may also claim first-time buyer relief (discounts) for properties worth up to £625,000.
- Buyers will then be charged 5% if the value of the property is from £250,001 to £925,000.
- Properties valued between £925,001 to £1.5 million will be taxed with a 10% stamp duty.
- Residential properties worth more than £1.5 million will be subject to 12% stamp duty.
What Does The Stamp Duty Cut Mean For UK Property Investors And Home Buyers?
Essentially, the stamp duty cut gives UK property investors and home buyers less worry about paying more.
Now that the limit has been raised to £250,000 on a permanent basis, more people are expected to become interested in investing in residential property. More so, for first-time UK property investors and home buyers.
The market itself has seen house prices either remain steady or increase—an indication that there is high demand. In the same light, interest in owning a home or building a property investment portfolio continues to grow.
However, the Bank of England’s recent announcement of the interest base rate increase from 1.75% to 2.25% may have a sobering effect. It remains to be seen how the property industry will receive these updates in the housing market.
How Does The Stamp Duty Cut Affect First-Time UK Property Investors and Home Buyers?
For first-time UK property investors and home buyers, this permanent stamp duty cut is especially good news.
If you’re looking to purchase property that is worth £425,000 or less, you are exempt from paying stamp duty. What’s more, first-time home buyers will now be able to claim relief (or discounts) for properties worth up to £625,000.
These developments don’t exactly mirror that stamp duty holiday from 2020-2021 but it offers many first-time home buyers a leg up on the property ladder.
Are You In The Process Of Buying A Property? The Stamp Duty Cut Is Good News For UK Property Investors And Home Buyers Like You
For UK property investors and home buyers who are in the process of purchasing property, they will be able to benefit as the stamp duty cut came into effect last Friday.
If you are in the process of buying property, be sure to contact your solicitor as soon as you can. That way, you can make the most of the stamp duty cut when purchasing your property investment. However, if your purchase was made before last Friday, 23 September, you may not be able to benefit from the stamp duty cut.
How Much Of A Positive Impact Will The Stamp Duty Cut Have On UK Property Investors And Home Buyers?
It might be too early to tell, but already, criticism of stamp duty cut is pouring in. Among the many concerns raised that run contrary to the stamp duty cut is the interest base rate hike. Many in the property industry are worried about its ripple effect on mortgages and the housing market at large.
Another criticism being lodged at the stamp duty cut is that it may have the opposite effect. Instead of driving interest, it may instead turn property investors and home buyers away by driving up house prices—even more.
Shadow Chancellor of the Exchequer Rachel Reeves has also questioned the benefits of the stamp duty cut, stating, “It’s going to take much more than a stamp duty cut to get our economy back on track and home ownership back to the levels last seen under the Labour government. These stamp duty changes have been tried before."
"Instead of a stamp duty rates going up and down like a yo-yo, we’ve got to get building. We need to target support at first time buyers and tackle the issue of homes being sold to overseas investors."
It’s interesting to note too that this stamp duty cut comes almost a year after the Covid-19 stamp duty holiday ended.
What does this stamp cut duty mean for property investors like you? Learn more about the current updates in the housing market, especially in the private rented sector by booking a chat with us today or calling us on 02079236100.