Chancellor Philip Hammond has abolished stamp duty for first-time buyers on properties worth up to £300,000 and on the first £300,000 on properties worth up to £500,000 in higher-value areas, such as London.
Philip Hammond also announced the Conservatives would make £15.3bn of new financial support available for housing over the next five years, bringing total support for housing to at least £44bn over this period.
Additionally he promised to build 300,000 new homes on average per year over the next five years, and said local authorities will be able to increase the council tax premium from 50% to 100% on vacant second homes.
It is quite clear that the cut in stamp duty will mostly benefit residents of London and the South-East, where property prices are highest. The tax does not apply to homes worth less than £125,000, meaning that any cut would not affect the cheapest properties.
Buyers of properties worth over £500,000 do not qualify for an exemption and will pay stamp duty in full. This includes first-time buyers who are buying a share of a property which is valued at over £500,000, even though they only own a portion of it. Shared ownership properties worth more than this amount are common in London but are rarely found in other parts of the UK.
The independent Office for Budget Responsibility said the tax break was likely to push property prices up by about 0.3%, with most of the increase coming in 2018.
“The main gainers from the policy,” said the forecasting group, “are people who already own property, not the FTBs [first-time buyers] themselves.”
If you’re buying a higher value property you’ll pay a different rate for different proportions of the property’s price and they’ll all add together to give the final stamp duty you pay. This works as follows:
- Up to £125,000 purchase price: 0% stamp duty
- £125,000.01 to £250,000: 2% (on that portion of the purchase price)
- £250,000.01 to £925,000: 5% (on that portion of the purchase price)
- £925,000.01 to £1,500,000: 10% (on that portion of the purchase price)
- £1,500,000.01+: 12% (on that portion of the purchase price)
For further advice regarding the recent stamp duty changes or if you are thinking about making a first-time purchase, contact us for professional advice on 01792 468684 or email firstname.lastname@example.org.