The 2024 elections are approaching and we are keeping an eye on the housing policies of the major political parties. This includes knowing the changes in stamp duty.
Stamp duty is a tax that you have to pay to the government when you buy or sell property. Currently, first-time buyers get a stamp duty discount for properties worth up to £425,000.
If elected, the Conservatives are expected to permanently scrap stamp duty for first-time buyers for properties worth up to £425,000. This will mean that people buying homes in this price range could save thousands of pounds.
What is Stamp Duty?
In simple words, stamp duty is a type of tax that you have to pay when buying a property or land. This tax is only applicable in England and Northern Ireland.
How much stamp duty you have to pay depends on the value of the property purchased.
- First-time buyers pay no stamp duty for properties priced up to £425,000.
- Homes worth up to £625,000 will have to pay a small stamp duty.
- For properties worth more than £625,000 you will have to pay higher stamp duty.
- Wales and Scotland have slightly different stamp duty rules. As property prices in these countries are low, most first-time buyers pay little or no stamp duty.
Who will benefit the most from the stamp duty threshold staying at £425k?
New home buyers in London and the South of England, this is great news for you! The government has recently reduced the tax (stamp duty) required to buy houses. This means you can save thousands of bucks on your new home!
Who will get the deduction?
- Home buyers whose homes cost between £250,000 and £425,000 will get the reduction.
- Remember, some new buyers buying homes worth more than £425,000 will still have to pay full stamp duty (mostly in London).
- Some new buyers will have to pay partial stamp duty.
- How much will you save?
In 2022 and 2023, more than 203,000 new buyers saved an average of £3,500 in stamp duty.
Of these, 150,000 paid no stamp duty, while 53,000 paid partial stamp duty.
What were the previous thresholds for stamp duty?
First-time home buyers did not have to pay stamp duty on properties worth up to £300,000.
For properties worth up to £500,000, you had to pay a small amount of stamp duty.
But what has changed in the mini budget in 2022?
- Government has given concession in stamp duty which will save you more money.
- Now first-time home buyers will not have to pay stamp duty on properties worth up to £425,000.
- And for properties worth up to £625,000 you’ll pay a bit of stamp duty.
Why would a lower threshold for stamp duty cause problems for first-time buyers?
With home prices and mortgage rates already on the rise, first-time buyers now have two more hurdles to overcome:
- Mortgage Affordability: The minimum income level required by banks to lend is now higher. This means that buyers have to deposit more money for the purchase.
- Large deposit: Due to high mortgage rates, buyers will need to put down a large amount to lower the price of the home.
Both of these barriers will make it difficult for many people to buy homes.
How can stamp duty relief help?
The government had given stamp duty concessions for first-time buyers, making them pay less. But now this discount has been cancelled, which means that buyers will now have to pay more for the home.
Who will it affect?
This will have the biggest impact on people in the south of England, where housing is expensive and people tend to save more. On average, first-time buyers in the south of England put down more than £60,000. Now they have to pay stamp duty in addition to this amount, which will make it difficult for many to buy houses.