The Government has announced an immediate cut to stamp duty in a move aimed at boosting an uncertain property market.
Chancellor Rishi Sunak told the House of Commons in a special statement at lunchtime on 8 July that stamp duty would no longer apply on property purchases up to £500,000.
The change will cut £4,500 from the average stamp duty bill in England and Northern Ireland, the Chancellor claimed, and will apply to all transactions completed before 31 March next year.
What the Chancellor said
He told MPs: “One of the most important sectors for job creation is housing. The construction sector adds £39 billion a year to the UK economy.
“House building alone supports nearly three quarter of a million jobs, with millions more relying on the availability of housing to find work.
“Uncertainty abounds in the market – a market we need to be thriving.
“We need people feeling confident – confident to buy, sell, renovate, move and improve. That will drive growth. That will create jobs.
“So to catalyse the housing market and boost confidence, I have decided today to cut stamp duty.
“Nearly nine out of ten people buying a main home this year [in England and Northern Ireland], will pay no stamp duty at all.”
What is stamp duty?
Stamp Duty Land Tax is a tax on residential property purchases in England and Wales graded so no tax at all is paid on the first £125,000 of a residential property purchase, two per cent on the amount between £125,001 and £250,000 and five per cent from £250,001 to £925,000.
These bandings have now changed with the Chancellor’s announcement.
Who will benefit from the stamp duty cut and how?
First time buyers used to be exempt from paying stamp duty up to £300,000 but, along with all non-first time buyers, will now be exempt up to £500,000.
This will save £2,137 from the cost of moving home for buyers in England and Northern Ireland of a property costing £231,855, the current UK average.
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Those purchasing buy-to-let properties or second homes will also benefit but will still have to pay an existing three per cent extra duty on the entire price.
Buyers paying more than £500,000 in a residential property transaction will be taxed at five per cent on the next £425,000 of their purchase up to £925,000.
From £925,000 to £1.5 million, the level of tax is 10 per cent and on amounts above £1.5 million, stamp duty will be levied at 12 per cent.
How much will this cost the Government?
The Government’s annual take from stamp duty is around £12 billion, according to HM Revenue and Customs, which works out at around two per cent of all Treasury revenue.
The stamp duty cut will cost the Government an estimated £3.8 billion in lost tax revenue.
The OnTheMarket view
Vikki Bennett, spokesperson for OnTheMarket, said: “The Chancellor’s bold move is bound to boost property transactions up and down the country.
“Last month, OnTheMarket generated a record number of enquiries for its estate agent and housebuilder customers and we welcome today’s step as a practical means of helping to sustain this post-lockdown bounceback and extend it for a longer period.
“As well as supporting first time buyers, and indeed buyers and vendors generally, these stamp duty savings will in turn generate revenue for all kinds of businesses who rely on a buoyant and fluid housing market.”
Estate agents respond
Nicola Thompson, a director from Leeds agent Adair Paxton:
“This stamp duty cut is very positive and welcome news for the housing market. It means the majority of buyers in Leeds will now pay no stamp duty at all.
“Although there is a limited supply of housing stock currently available for sale, these changes will undoubtedly help to boost confidence in the market and should encourage more home moves.”
Patrick McCutcheon, head of residential at Yorkshire agent Dacre, Son & Hartley:
“The property market has enjoyed good momentum since our return from lockdown at the end of May, with good activity across the majority of price sectors.
“But with looming job cuts and a clear and present risk to the economy the incentive of raising the threshold for paying stamp duty from £125,000 to £500,000, is very welcome and should keep the present momentum rolling.”
Dominic Agace, chief executive of Winkworth:
“Ninety per cent of homes will now be exempt from stamp duty, which is a tremendous fillip for first-time buyers and home movers nationwide.
“With the current pressures on where and how people work, the ability to be able to move home without punitive taxes is essential. The move should also benefit people whose homes fall outside the threshold, as it will create a more active pipeline of buyers in the market.”
