Mini-Budget Includes Permanent Stamp Duty Reduction

Mini-Budget Includes Permanent Stamp Duty Reduction
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Chancellor Kwasi Kwarteng has unveiled his mini-budget, in which he announced a permanent cut to the Stamp Duty Land tax (SDLT).

As part of the fiscal event – or mini-budget – the Chancellor held on Friday, he announced a permanent reduction in the SDLT, which will mostly benefit first-time buyers.

The second announcement concerning the property market is the plan for Investment Zones, which is aimed at increasing the housebuilding rate.

Given the current state of the housing market, how will these measures affect it?

How Much Was SDLT Cut In The Mini-Budget?

Mr Kwarteng announced a permanent cut to SDLT with immediate effect on Friday. This means any sales that are still in progress will benefit from this change.

But what has changed? In effect, he has removed the second band for properties between £125,001 – £250,000 which were taxed at 2%.

Instead, now for properties up to £250,000, buyers no longer have to pay stamp duty.

This means that 33% of all residential properties are exempt from SDLT, according to Rightmove.

For the other brackets, the SDLT rate remains the same:

  • portion from £250,001 to £925,000 is taxed at 5%
  • portion from £925,001 to £1.5 million is taxed at 10%
  • portion above £1.5 million is taxed at 12%

While these rates have not changed, the fact that properties up to £250,000 have a zero tax rate means that everyone will pay less stamp duty.

For example, if a property costs £295,000, the first £250,000 are free of tax. On the remaining £45,000, the buyer pays 5% tax, which equates to £2,250.

So the total tax payable is £2,250. This means the buyer pays 0.76% tax on their property. Before the change, the tax for the same property would have amounted to £4,750 or 1.61%.

For a property that costs £1.6 million, the buyer would have paid £105,750 or 6.61% in SDLT before the change. Now the tax for the same house would be £103,250 or 6.45%.

First-Time Buyer Discount Increased

At the same time the Chancellor has increased the discount for first-time buyers, who will now be able to buy a house for up to £425,000 before they have to pay stamp duty.

On the portion from £425,001 to £625,000, first-time buyers pay 5% SDLT. First-time buyers who want to buy a home above £625,000 are not eligible for the tax discount.

Because of this change 66% of all residential properties in England are exempt from SDLT for first-time buyers, Rightmove says.

This change has been made to reflect the recent steep price rises and inflation, which has meant many first-time buyers were no longer able to afford to get on the property ladder.

New Investment Zones

Apart from the stamp duty cut, Mr Kwarteng has also announced the plan to create Investment Zones in his mini-budget, which will have relaxed planning restrictions and on the purchase of land for development in these zones no stamp duty has to be paid.

The Chancellor said that the Government is currently in discussions with 38 local and mayoral combined authority areas in England to create these Investment Zones.

Each Investment Zone will offer generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development. These will be hubs for growth, encouraging investment in new shopping centres, restaurants, apartments and offices, and creating thriving new communities.

Kwasi Kwarteng, The Chancellor of the Exchequer

How Has The Property Market And Industry Insiders Reacted?

The immediate reaction to the announcement of the stamp duty cut was a 10% increase in search traffic on Rightmove, the property platform reported.

This seems to suggest that demand, which has started to wane recently, might rise again.

Although housing stock levels are back to 2019 levels, according to Rightmove’s latest House Price Index, demand is still outstripping supply. With demand 20% higher than pre-pandemic levels. This will keep the upward pressure on house prices.

Rightmove reported a 0.7% rise in house prices in September, after the 1.3% drop in August. The annual house price growth now stands at 8.7%.

While industry insiders have welcomed the stamp duty reduction, they have criticised that no help was given to downsizers.

We did hope that Stamp Duty for downsizers or last time movers would have also been reviewed to release the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.

Nathan Emerson, Chief Executive of Propertymark

Others were disappointed that the Government did not do more to encourage energy-efficient properties.

Commentators have also warned that the stamp duty cut will not address the problem of low supply levels. The plan to create Investment zones has been welcomed by property insiders, but they called for more clarity.

Some also warned that promises to make the planning process easier and quicker had been made before, only to be broken.

Others have questioned if these changes will be implemented quickly or if it will drag on and get abandoned like the Planning White Paper.

What exactly the impact on the housing market the measures from the mini-budget will have is not yet clear. But it looks like it has driven up interest and demand.


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    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

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