What is Stamp Duty and why is it being Cut?
Fri 23 Sep 2022
Today Friday the 23rd of September 2022, the new chancellor Kwasi Kwarteng will announce plans in the Conservative's "mini budget" to cut stamp duty. Our newly appointed Prime Minister, Liz Truss, has previously argued that lowering Stamp Duty, which is payable on property purchases over £125,000, is “critical” to economic growth. What would be the implications of lowering stamp duty? Let's find out!
Stamp Duty is a tax you might have to pay when you buy a new home. It is paid by the purchaser of land or property in England and Northern Ireland. The rate depends on the value of the property or land. Currently, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000, stamp duty is charged at 2%; from £250,001 to £925,000 it is 5%; and from £925,001 to £1.5m it’s 10%. For any purchase above £1.5m, the levy is 12%.
Meanwhile, for first-time buyers the threshold at which stamp duty is paid is £300,000. Separate land taxes apply in Scotland and Wales.
Use this Stamp Duty Calculator to work out how much Stamp Duty you would have to pay on your property or land.
Prime Minister Liz Truss believes that cutting stamp duty will “encourage economic growth” by allowing “more people to move and enabling first-time buyers to get on the property ladder”, said The Times in a recent interview. Cutting Stamp Duty is considered a risky move, especially at a time when the Government plans on cutting other tax rates - Stamp Duty usually brings in around £15 billion a year in revenue for the exchequer!
From July 2020 to the end of June 2021, there was a "Stamp Duty Holiday" where no Stamp Duty was paid on any property purchases with a sales value of under £500,000. (This was extended to 30th September 2021 for properties under the value of £250,000.) This was introduced because there was a worry that movers would be put off by the idea of moving home during a global pandemic. There were worries of stagnation in property prices and even a crash. However, the complete opposite occurred! The Stamp Duty Holiday and the fact that people wanted more space and access to rural areas after being couped up during lockdown were both contributing factors in the property market boom.
There is evidence that the stamp duty holiday had a favourable effect on the property market. Estate agents reported a surge in inquiries during the initial holiday (which ended in June), and house prices rose at their quickest rate since 2004. During this time, 1.3 million buyers in England paid no stamp duty on the first £500,000 of their purchase. The property market did slow down after 30 June 2021. Residential transactions that were completed in July decreased 63% from the previous month, according to tax data. Despite this, the growth in home prices remained positive at 10.5%.
Boosting the housing market is seen as an "easy win" for the Government when trying to give the economy a lift. An increase in house prices and volume of sales leads to more jobs in the construction industry; better distribution of wealth; a stronger financial services industry and strong property market "indicators" attract investors to invest their capital in to British businesses.
First-Time Buyers: If you are thinking about buying your first home, we would encourage you to get in touch with us and register as a buyer so we can let you know when new properties come on the market that suit your needs. We anticipate another surge of enquiries coming in, especially for properties suitable for first-time buyers.
Movers: With the rising cost of inflation and increasing interest rates, now would be a good time to maximise the value of your home and to start looking for your next home. Our team of professional estate agents are fantastic in helping property purchasers and vendors every step of the way.
What is Stamp Duty?
Stamp Duty is a tax you might have to pay when you buy a new home. It is paid by the purchaser of land or property in England and Northern Ireland. The rate depends on the value of the property or land. Currently, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000, stamp duty is charged at 2%; from £250,001 to £925,000 it is 5%; and from £925,001 to £1.5m it’s 10%. For any purchase above £1.5m, the levy is 12%.
Meanwhile, for first-time buyers the threshold at which stamp duty is paid is £300,000. Separate land taxes apply in Scotland and Wales.
Stamp Duty Calculator
Use this Stamp Duty Calculator to work out how much Stamp Duty you would have to pay on your property or land.
Why is Stamp Duty being Reduced?
Prime Minister Liz Truss believes that cutting stamp duty will “encourage economic growth” by allowing “more people to move and enabling first-time buyers to get on the property ladder”, said The Times in a recent interview. Cutting Stamp Duty is considered a risky move, especially at a time when the Government plans on cutting other tax rates - Stamp Duty usually brings in around £15 billion a year in revenue for the exchequer!
From July 2020 to the end of June 2021, there was a "Stamp Duty Holiday" where no Stamp Duty was paid on any property purchases with a sales value of under £500,000. (This was extended to 30th September 2021 for properties under the value of £250,000.) This was introduced because there was a worry that movers would be put off by the idea of moving home during a global pandemic. There were worries of stagnation in property prices and even a crash. However, the complete opposite occurred! The Stamp Duty Holiday and the fact that people wanted more space and access to rural areas after being couped up during lockdown were both contributing factors in the property market boom.
There is evidence that the stamp duty holiday had a favourable effect on the property market. Estate agents reported a surge in inquiries during the initial holiday (which ended in June), and house prices rose at their quickest rate since 2004. During this time, 1.3 million buyers in England paid no stamp duty on the first £500,000 of their purchase. The property market did slow down after 30 June 2021. Residential transactions that were completed in July decreased 63% from the previous month, according to tax data. Despite this, the growth in home prices remained positive at 10.5%.
Boosting the housing market is seen as an "easy win" for the Government when trying to give the economy a lift. An increase in house prices and volume of sales leads to more jobs in the construction industry; better distribution of wealth; a stronger financial services industry and strong property market "indicators" attract investors to invest their capital in to British businesses.
Our Advice to You
First-Time Buyers: If you are thinking about buying your first home, we would encourage you to get in touch with us and register as a buyer so we can let you know when new properties come on the market that suit your needs. We anticipate another surge of enquiries coming in, especially for properties suitable for first-time buyers.
Movers: With the rising cost of inflation and increasing interest rates, now would be a good time to maximise the value of your home and to start looking for your next home. Our team of professional estate agents are fantastic in helping property purchasers and vendors every step of the way.
Featured Property
4 Bedroom Semi Detached Edwardian Home, Gawber Road, Barnsley
£235,000
CHARACTERFUL FOUR BEDROOM EDWARDIAN END OF TERRACE - EXTENSIVELY RE-DECORATED AND NEW FLOOR COVERINGS TO MOST AREAS - IDEALLY SUITED TO FAMILY PURCHASER - PROVIDING VERSATILE ACCOMMODATION SET OUT ON FOUR FLOORS - POTENTIAL FOR SUB-LETTING OF BASEMENT AREA - EASILY MANAGED GARDEN TO REAR WITH OFF-STREET PARKING FOR ONE VEHICLE - ONLY A SHORT WALK FROM THE TOWN CENTRE AND HOSPITAL