Alistair Darling has axed stamp duty on properties bought for less than £250,000 in his Budget report today.
Such a move will save an estimated 73% of first-time buyers from having to pay this tax.
Properties bought for less than £125,000 are currently exempt from stamp duty, while buyers of property between £125,001 and £250,000 have to pay 1%.
On 2 September 2008, Darling introduced a stamp duty ‘holiday’ that saw the 0% threshold temporarily raised from £125,000 to £175,000. This lasted until the end of December 2009.
Raising the threshold to £250,000 would help 350,000 households buying properties this calendar year, according to the Council of Mortgage Lenders.
This would add to the 220,000-odd households currently expected to be exempt from paying stamp duty in 2010 - and would mean that around two thirds of all transactions would be exempt.
However, the cost to the government is expected to be between £630 and £750 million. The move will be paid for by increasing the rate of stamp duty on properties worth £1 million or more to 5%.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, says: "Measures to help boost the housing market are welcome and will benefit a significant number of buyers, removing 50% of transactions from the stamp duty system."
But Jonathan Moore, director of easyroommate.co.uk, says that while raising the stamp duty threshold would help first-time buyers it doesn’t address the problem of mortgage availability.
“First-timers simply can’t borrow enough cash to buy a home,” he adds.
The impact of a 5% rate of stamp duty on properties worth £1 million or more will be minimal, says James Hyman, partner for residential sales at property consultants Cluttons.
“Raising the stamp duty threshold to 5% for properties over £1million is unlikely to dampen demand at this level of the market as a 1% increase will make little difference to buyers who tend to be less price sensitive,” he adds.