Kwarteng says measures are to support growth, increase confidence and help families aspiring to own their own home.
Chancellor Kwasi Kwarteng has announced changes to England and NI’s stamp duty system that, commentators have already predicted, are likely to significantly stimulate the lower end of the property market and, in particular, first time buyer (FTB) activity.
The zero-rated range for all purchasers rises from £125,000 to £250,000 while the zero rate paid by first-time buyers rises for homes worth up to £425,000. This is an increase from £300,000.
Also, the value of homes that FTBs can claim this zero-rate relief on rises to £625,000, a sop to struggling young aspiring buyers in London and the South. This means FTBs buying a £500,000 property, for example, will now pay zero stamp duty on the £425,000 portion of the value, but pay 2% on the remainder.
“Today’s statement is about growth – home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society so to support growth, increase confidence and help families aspiring to own their own home I can announce that we are cutting stamp duty,” said Kwarteng (main pic).
The announcement is the first permanent change to the house purchase tax system since November 2017 when the FT zero rate up to £300,000 was introduced.
Since then several ‘holidays’ have been implemented all related to stimulating the economy post-Covid, although these ended on 1st October last year.
Nathan Emerson, CEO of Propertymark, says: “The rebalancing of the thresholds for which stamp duty is paid, in particular for first time buyers is long overdue to catch up with house prices which have risen at an extraordinary rate.
“We did hope that stamp duty for downsizers or last time movers would have also been reviewed to release the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.”
Phillip Stevens, director of Richmond estate agency Antony Roberts, says: “This stamp duty incentive could be a much-needed boost just as the housing market is starting to slow down and mortgage costs are rising.
“We particularly welcome the decision to make it a permanent move. The temporary nature of the last stamp duty concession, which was tied to completion dates, caused chaos as everybody tried to move in the same week, making it a nightmare for solicitors and removal companies as well.
“Making it a permanent adjustment is sensible and far less disruptive, avoiding the delays and bottlenecks we saw last time.”
Dominic Agace, chief executive of leading estate agents Winkworth, with more than 100 offices nationwide, said: “At a time when the BOE has announced we are already in recession, it is welcome to have a promptly presented agenda for growth.
“Some big and welcome changes initiated with a long overdue reduction of the extremely negative stamp duty, which hopefully now will allow a better functioning housing ladder. It is vital we get new buyers on to the housing ladder.
“Other initiatives to encourage investment in special zones are also welcome and can help much needed regeneration to these areas, creating better local environments and higher quality housing stock for people to enjoy.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The Chancellor clearly recognises the dangers in terms of reduced revenue from stamp duty, given the recent reduction in housing market activity, and has taken steps to boost the market.
“The stamp duty cut, particularly for first-time buyers, should encourage those at the first rung of the housing ladder to take the plunge, which will be good not just for the market but for job and social mobility across the board, as well as the wider economy.
“It is good news that it is an immediate and permanent reduction which means that existing transactions shouldn’t be unduly delayed and the benefits can be felt as soon as possible.
“We would have liked to have seen extra help not just for first-time buyers but to encourage energy-efficient properties and more investment on cutting energy use.
Brian Murphy, Head of Lending at Mortgage Advice Bureau, says: “This could turn out to be an excellent time to properly revisit the structure of stamp duty.
“Numerous governments have tinkered with it, but it tends to push up prices for a short period and then momentum generally mellows.
“It hasn’t been long since we last had a stamp duty break, and these things tend to generate momentum that causes a flurry of activity followed by a period of slowdown. However, the permanency of today’s announcement may temper a sudden surge of activity and allow some control of the UK property market to be regained.
Still, the crux of the issue is that any changes in stamp duty will not address the main problem right now: a significant supply shortage.”
Paula Higgins, Chief Executive of HomeOwners Alliance, says: “The fact the change is permanent and starts today is particularly welcome as it will avoid the chaos of the previous stamp duty holidays. It means those who had put their move on hold earlier this week when speculation began can now crack on with their exchange and completion
How the Government’s mini-budget affects landlords
The much anticipated mini-budget from the new Chancellor Kwasi Kwarteng delivered a few surprises for landlords.
Income tax rates have been changed and there is a cut to stamp duty.
However, one critic says the government has missed an opportunity to help renters deal with the cost-of-living crisis.
Main points that affect landlords
The main points in the mini-budget that affect landlords include:
- The basic rate of income tax cut to 19p from April 2023, with the 45% higher rate ‘abolished’ – it will be replaced with a single higher rate of 40%
- Stamp duty land tax is being cut in England and Northern Ireland – the limit for buyers has been raised to £250,000 or £425,000 for first-time buyers
- The planned increase in corporation tax has been cancelled, so it will remain at 19%
- A new bill to unpick the complex patchwork of planning restrictions and EU-derived laws that he says ‘constrain our growth’
- The planned rise in National Insurance contributions will be reversed from 6 November.
Basic rate of income tax cut
Chancellor Kwasi Kwarteng announced that the basic rate of income tax is to be cut.
He said: “I can announce today that we will cut the basic rate of income tax to 19p in April 2023 – one year early.
“That means a tax cut for over 31m people in just a few months’ time.
“That means we will have one of the most competitive and pro-growth income tax systems in the world.”
Cut to stamp duty thresholds
There is also a cut to stamp duty with the limit being raised to £250,000, and £425,000 for first-time buyers.
Also, first-time buyers will be able to claim tax relief on the first £625,000 of their new home.
This will, the Chancellor claims, mean 200,000 will be taken out of paying the duty.
Mr Kwarteng said: “And 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.”
Cuts to National Insurance and the health and social care levy
Mr Kwarteng also confirmed the cuts to National Insurance and the health and social care levy that were announced yesterday.
And, as expected, the corporation tax rise planned for next year has been cancelled – the rate will remain at 19% and not go up to 25%.
Recipe for yet more unsustainable house price rises
Gary Wright, the co-CEO of payment technology firm flatfair, said: “Increasing demand through cuts to stamp duty, while having no meaningful plans to increase supply, is a recipe for yet more unsustainable house price rises.
“The pandemic proved this.
“Overvalued homes do not equal economic growth anywhere except on paper. The effects won’t be felt in wider society.”
He added: “If this government is serious about sharing the benefits of a high-growth economy, it would do well to mitigate the impact of the cost-of-living crisis on renters, who are often the most vulnerable in society.
“Reforming the tenancy deposit system to incorporate more than just a punishing traditional five-week deposit – which averages more than £2,200 in London – would be a good start.”
Steps to boost the market
Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “The Chancellor clearly recognises the dangers in terms of reduced revenue from stamp duty, given the recent reduction in housing market activity, and has taken steps to boost the market.
“The stamp duty cut, particularly for first-time buyers, should encourage those at the first rung of the housing ladder to take the plunge, which will be good not just for the market but for job and social mobility across the board, as well as the wider economy.
“It is good news that it is an immediate and permanent reduction which means that existing transactions shouldn’t be unduly delayed, and the benefits can be felt as soon as possible.”
He added: “The ambition to reduce planning red tape and improve delivery is particularly interesting because if there is one thing we need more than anything it is additional affordable housing to sell and to rent.
“Nothing is more frustrating than gaining planning permission for suitable schemes and then waiting sometimes more than a year for work to begin as often unnecessary regulation needs dealing with.”