Chancellor raises stamp duty threshold to £500,000
A stamp duty holiday on properties of up to £500,000 will take place with immediate effect, it has been announced.
In his Summer Economic Update the chancellor Rishi Sunak said he was raising the threshold in a temporary move which would remain in place until March 2021.
During his speech, which aimed to lay out the second phase of the government’s economic response to the Covid-19 crisis, he said the housing market had been badly hit by the pandemic.
He said property transactions were down, house prices had fallen and this had created uncertainty.
Sunak said withdrawing stamp duty to buyers purchasing homes of £500,000 and under would save the average buyer £4,500.
The news has been broadly welcomed by the mortgage and property industry with many describing it as a much-needed boost and expressing relief it would be taking place with immediate effect.
Lee Chiswell, head of Barclays Mortgages, was one of many lenders to salute the announcement. He said: “We welcome today’s news from the chancellor.
“This change will provide a boost for the property market and will help the nation start to move with confidence once again, providing financial and psychological relief to those looking to move into a new property.”
And Laura Suter, a personal finance analyst at AJ Bell, agreed. She said home buyers purchasing some of the properties near the top of the threshold could save as much as £15,000 when the duty is scrapped.
But, she warned, the fact it was temporary would provide a ‘sugar rush’ for the housing market as people hurried in their droves to purchase a home before the March deadline.
“The almost £4bn giveaway is a massive leap in the stamp-duty-free rate from £125,000 to £500,000, and on the average UK property price of £231,855 a homebuyer would save £2,137,” she said.
“The tax relief will clearly benefit those in London and the south-east most, where house prices are higher and so the potential tax saving is greater.
“The move is also across the board, meaning even those buying a second or third home or buying multi-million pound houses will benefit from the tax break – clearly the intention is to encourage all areas of the market to get buying and stimulate the housing market.”
Sunak said nine out of 10 buyers would benefit from the tax break. And research by online home moving service Reallymoving suggested four out five first-time buyers in London would benefit from the increased threshold.
Rob Houghton, CEO of reallymoving said: “This tax giveaway could have a significant impact on the market, particularly in more expensive locations such as London, where the majority of first-time buyers have still been liable to pay stamp duty, and the south east.
“First-time buyers fortunate enough to have secure jobs and large deposits stand to benefit the most, however, and many still face considerable challenges including an insecure jobs market and the withdrawal of higher loan-to-value mortgages.”
Phil Bailey, sales director of mortgage tech provider Twenty7Tec, was also concerned the exemption might even disadvantage first-time buyers. “In our view, [the stamp duty holiday will] drive a surge in demand, but it’s more than likely going to support people to buy bigger than helping those who are struggling to get onto the property ladder,” he said.
“The additional demand caused by this could push house prices up or see them stay the same and not drop as expected later this year.”
Charlotte Nixon, mortgage expert at Quilter thought the stamp duty holiday would help entice back to market some of the buy-to-let investors who had left due to tax changes.
“Not only will this cut help to reignite the property market but also improve the supply of rental properties, which has been dwindling over the last 12 months.
“Over the last five to 10 years the government has been reforming stamp duty to remove tax burden from first time buyers and increase the tax take from landlords, having today waived stamp duty the playing field has been levelled for first time buyers and BTL investors as both are paying the same rate (nil).
“However, these landlords will still need to pay the 3% second home surcharge.”