In the last few weeks, the news has been dominated by talk of stamp duty, inflation and interest rates.
For anyone planning a home move in the near future, these headlines would have understandably piqued a particular interest, and probably none more so than the announcement of the game-changing ‘mini budget’ on 23rd September.
Under the changes announced - which saw the biggest tax cuts for 50 years - stamp duty has been ceremoniously slashed in a bold move which looks set to give the housing market a welcome boost...and at a time when fears of a slow-down in both buyer confidence and growth were prevailing.
What is stamp duty?
Stamp duty is a tax payable to the Government on completion of any property/land purchase priced above a certain threshold. The amount you pay depends on the price and location of the property, and also whether you are a first-time buyer or UK resident.
What are the changes that have been brought in?
From 23rd September, the stamp duty threshold has been raised to the first £250,000 of a property’s purchase price, representing an average 5% saving, depending on the total cost of the home you are buying.
For first time buyers, this threshold has been raised to £425,000, with the maximum property value on which relief can be claimed also increasing from £500,000 to £625,00.
Stamp duty rates for those buying second homes or buy-to-let/investment properties will continue to have a 3% surcharge.
In practice, this means that properties costing up to £250,000 (and £425,000 for first-time buyers) will incur zero stamp duty, rising to 5% for those costing £250,000 - £925,000. Ten percent is now payable on properties costing £925,000 - £1,500,000, rising to 12% on those more than £1,500,000.
What does this mean?
Under these new changes, it is estimated that 200,000 people will be taken out of paying stamp duty altogether, with a third of all homes currently for sale in England (33%) now exempt from this additional cost, including the above pictured property in Maidenhead, Berkshire, recently listed with Braxton estate agents.
Before the announcement, when the threshold was £125,000 (£300,000 for first time buyers), this figure was just 7%.
The changes from this reformed policy will inevitably have a significant impact on the majority of people buying a new (or first) property in the coming months/years, with those taking their first step onto the property ladder now able to access up to £11,250 in savings.
What are the benefits?
The changes are predicted to provide a welcome boost to first time buyer transactions – something which it is hoped will have ripple effects across the market – as well as helping to take the pressure off the rental market.
In addition, the change is expected to help promote wider residential investment by opening the market to those who have been wanting to move, but who have been unable to raise the funds to do so.
Given that the economy is fuelled by a healthy property market, the benefits are projected to be far-reaching.
In summary
While it remains widely uncertain, how these recent cuts will impact the UK’s bigger financial picture, it has certainly boosted confidence in economic growth.
Also, because the Stamp Duty announcement is a permanent change, it will inevitably help to avoid the cliff edge environment that similar moves have created in the past (eg. during the Pandemic.)
What is important to keep in mind, however, is that for those living in areas where the average house price is above £250,000, any saving on stamp duty has the potential to be balanced out by increased deposit requirements.
Weighed against the ever-changing mortgage picture, as well, the decision making process remains as complex as ever, but with all factors considered, we've every reason to be optimistic that the 'Kwasi Budget' gamble will pay off.
For more details on how the mini-budget might impact your potential property purchase, you can refer to the Rightmove stamp duty calculator, or call Braxton on 01628 674234 for local market insight and to register for property updates.