What is the stamp duty cut announcement?
Stamp duty land tax in England and Northern Ireland on residential property has from today (23 September 2022) been reduced permanently as follows:
- The nil rate band has increased to £250,000 (from £125,000);
- The nil rate band for First Time Buyers has increased to £425,000 (from
- The property value on which First Time Buyer relief may be claimed has
increased to £625,000 (from £500,000).
The cuts should apply to anyone who has already exchanged contracts but has not completed them before today. The official announcement can be read here There will also be full stamp duty exemption on land bought for commercial or residential development in designated investment zones in England.
What is the announcement designed to do and how will it help people?
According to Chancellor Kwasi Kwarteng: “Cuts to stamp duty will get the housing market moving and support first-time buyers to put down roots.”
How do the new stamp duty cuts work?
The main cut for residential stamp duty abolished the tax on the slice of the purchase price between £125,001 and £250,000 which was previously taxed at 2% with the tax now kicking in at £250,001 at the 5% rate. The cut represents a potential tax saving of £2,500 across all purchases of £250,001 and above.
For first-time buyers the Government gave the following case studies illustrating how the new first-time buyer stamp duty rates would work:
Case study 1 – first-time buyer in London Average London house price (Land Registry Data July 2022) – £543,500
Original SDLT bill – £17,175 (First Time Buyers wouldn’t have been eligible for First Time Buyer’s Relief under the old system)
New SDLT bill – £5,925
Saving is £11,250 (-65%) (£2,500 due to nil-rate band up to £250k and £8,750 due to First Time Buyer’s Relief changes)
Case study 2 – standard home mover
Average England House Price (Land Registry Data July 2022) – £312,000 Current SDLT bill – £5,600 New SDLT bill – £3,100
Saving is £2,500 (-45% of the original bill)
What are the new rates of stamp duty?
Yes, the 2% rate on the slice of the purchase price between £125,001 and £250,000 has been abolished leaving the new rate structure as follows:
|Band||Stamp duty land tax rate||Additional rate for landlords / second homes|
|(First-time buyers pay 0% to £425,000 then normal rates apply)|
|£0 – £250,000||0%||3%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1.5m||10%||13%|
|* No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC|
Note: non-UK resident purchasers pay an additional 2% across all rate bands.
Will the new stamp duty cuts impact overseas investors?
Not much given that the maximum saving is £2,500 and this will be dwarfed by the effect of the fall in the value of the Sterling which on its own makes UK property much more attractive to overseas investors.
Although the cuts will help buyers and downsizers at the lower end of the property market, it is hard for most people to get too excited about a cut of £2,500 in stamp duty especially when the previous stamp duty holiday gave a maximum stamp duty saving of £15,000 on the first £500,000 of the purchase price.
One good feature of the cut is that it is not time limited and so avoids the terrible cliff-edge for buyers and conveyancers when a stamp duty relief has a time-limited existence and buyers scramble to beat the cut-off date.
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For professional and insurance reasons Patrick is unable to offer any advice until he has been formally instructed.