23 Sept 2022
The cost of moving home has today been cut with Prime Minister Liz Truss and chancellor Kwasi Kwarteng’s mini-budget announcement of a cut to Stamp Duty Land Tax (SDLT).
The cut to SDLT aims to boost the property market and help more first-time buyers buy their first home.
The mini-budget or fiscal statement as it is officially known has been announced as part of the government’s “growth plans”, at a time when Britain faces the prospect of a year-long recession, raised inflation, and a cost-of-living crisis.
Stamp duty is paid by buyers of land or property in England and Northern Ireland, with different rates depending on the value of the land or property. Separate land taxes apply in Scotland and Wales.
Before the SDLT cuts were announced today, first-time buyers paid no SDLT up to £300,000 on their first house purchase. For other buyers of residential properties, there was no SDLT to pay on the first £125,000. Between £125,001 and £250,000, a 2% tax was applied; 5% between £250,001 and £925,000; 10% between £925,001 and £1.5 million; and 12% on the value of a property above £1.5 million.
The proposed cuts reduce Stamp Duty Land Tax by raising the threshold of how much a property has to cost before stamp duty is paid to £250,000. The threshold for first-time buyers paying SDLT has also risen to £425,000.
In addition, chancellor Kwasi Kwarteng added: "We’re going to increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000. The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether. This is a permanent cut to stamp duty, effective from today."
The reduced rates of SDLT will apply to property purchases that complete from today. Your conveyancer will be able to offer advice about what the cuts mean for your purchase, and advise whether you are able to take advantage of the SDLT cuts for your transaction.
In recent months the demand for housing in Britain has not been met with supply, causing rapid house price inflation with UK average house prices increasing by 15.5% in the year to July, the highest annual inflation rate since May 2003, according to official figures.
The Centre for Economics and Business Research (Cebr), have predicted that 2023 is likely to be a challenging year for the UK housing sector. With steep rises in mortgage rates and cost of living pressures for households, UK house prices are expected to fall by 4.5% on average next year.
However, new data has predicted that this fall in house prices is still unlikely to make property more affordable for buyers, with house price growth consistently outpacing earnings. So, the announcement of a cut to SDLT could give a boost to the market at a time when household finances are being squeezed.
It is hoped the cuts to Stamp Duty may echo a previous boost similar to the ‘stamp duty holiday’ in 2020 which was introduced to stimulate the housing market during the pandemic. The SDLT ‘holiday’ resulted in transactions in the year to June 2021 increasing by 19% compared to the previous 12 months. However, it remains to be seen if the SDLT cuts announced today will offer the same boost in the face of rising interest rates on mortgages and higher cost-of-living.
Buyers who are able to take advantage of the cuts to SDLT are set to find the costs of moving house have reduced from today.
However, if you are thinking of moving house there are a number of costs to consider, including Legal Fees, Stamp Duty Land Tax, Valuation Fees and Surveyor’ fees. You can find out exactly how much SDLT you are likely to pay using the HMRC calculator.
How much you will have to pay for your legal fees depends on whether you are buying or selling property (or both), the value of the property you are selling / purchasing, and whether the property is leasehold or freehold. Our online calculator will show you how much you can expect to pay based on your individual circumstances, with no hidden extras.
To speak with one of our conveyancing solicitors about buying your new home, contact us today