Chancellor Philip Hammond saved the best bit of news for potential homeowners until the end of his Budget speech, announcing that the government is abolishing stamp duty land tax on homes under £300,000 for first-time buyers with immediate effect.
Meanwhile, London’s first-time buyers who are buying properties between £300,000 and £500,000 will not pay duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save the average first-time buyer £1,660.
|Revised rates and thresholds for residential property purchases worth £500,000 or less by first time buyers|
|Portion of property value||Current standard rates||Rate for first time buyers from 22 November 2017|
|Up to £125,000||0%||0%|
|Over £125,000 and up to £250,000||2%||0%|
|Over £250,000 and up to £300,000||5%||0%|
|Over £300,000 and up to £500,000||5%||5%|
|Source: HM Revenue and Customs|
Mr Hammond says this tax break means that 95% of first-time buyers who pay stamp duty will benefit, while 80% of first-time buyers will pay no stamp duty at all.
There will be no relief for those buying properties over £500,000.
Mixed response from property pundits
Feedback from leading experts in the property market is that while this tax break for first-time buyers is welcome news, Mr Hammond could have done more to alleviate stamp duty woes to other house buyers.
Alex Gosling, chief executive of online estate agent HouseSimple, says: “Many will feel the Chancellor should have abolished stamp duty altogether. It's an archaic tax that hurts the people who need help the most, and is nothing more than an easy way for the Treasury to fill its boots."
He adds: "London is still a problem area, with our research showing that less than a third of homes are on the market currently at under £500,000, and will benefit from the stamp duty exemption for first-time buyers. However, before the Budget just 0.3% properties on the market in the capital would have been stamp duty exempt for first-time buyers, so this is definitely a step in the right direction.”
Paula Higgins, chief executive of consumer group Homeowners Alliance, believes that Mr Hammond could have gone further, helping last-time buyers and those buyers who temporarily own more than one home.
She explains: “I would have liked to see more help for last-time buyers too, such as a stamp duty cut for downsizers. Freeing up larger family homes is essential for the fluidity of the market, but there are currently no incentives to downsize and a lack of suitable properties to move too.
“Mr Hammond should also have addressed the stamp duty surcharge issue for buyers who purchase their next property before selling their current home. Under the new system introduced last year, these buyers are forced to cough up the extra 3% and must then go through the arduous process of claiming it back. The fact that refunds are currently running at £10 million a month shows how flawed this system is.”
‘Use windfall to top up your deposit’
While welcoming the news, Dan Hegarty, chief executive of digital mortgage broker Habito, warns first-time buyers to spend their tax windfall wisely.
He says: “For those who have already saved their stamp duty monies, this is an unexpected windfall. Tempting as it may be to use this money elsewhere, many would make best use of it by topping up their deposit.
“A larger deposit opens up the number of mortgage products to choose from, including those with lower interest rates. This could lead to savings that far exceed the extra initial outlay, over the long term.