As featured in ShowHouse 23rd September 2022 by Keith Osborne
Government Announces Stamp Duty Changes
The government has announced changes to Stamp Duty with the aim of reducing costs and boosting first-time ownership…
Chancellor of the Exchequer Kwasi Kwarteng today announced major changes to Stamp Duty in England and Northern Ireland to help recover the property market and economy in the cost-of-living crisis.
In his ‘mini-budget’, from today he raised the nil-rate threshold – the minimum price from which Stamp Duty is payable – from £125,000 to £250,000, and revised the price bands for first-time buyers. Those purchasing a first home pay no Stamp Duty on properties up to £425,000 and can claim relief on properties up to £625,000 (formerly £500,000).
HM Treasury announced on Twitter: “We’re cutting Stamp Duty Land Tax which will help more people to move, promote residential investment and boost first-time ownership.”
The new owner-occupier Stamp Duty rates
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £250,000 | Zero |
| next £675,000 (the portion from £250,001 to £925,000) | 5% |
| next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| remaining amount (the portion above £1.5 million) | 12% |
The housebuilding and property industry has reacted to the announcement.
Matthew Pratt, Redrow’s CEO: “In its current form, Stamp Duty eats into people’s deposits, impacting affordability and ultimately penalising those looking to relocate for work or wanting to downsize as part of retirement plans. Stamp Duty needs to be reformed to help the housing market work more effectively and to stimulate more transactions, which will in itself drive tax generation throughout the home buying supply chain of estate agents, solicitors, removals, furnishings etc. Whilst we welcome today’s change, we would encourage the government to consider further steps to reduce the Stamp Duty burden by reducing the tax bands across all levels, and introducing a lower, flat rate of tax for all homes.”
Joe Garner, managing director at London-based property developer, NewPlace: “Introducing a cut to Stamp Duty five weeks prior to the deadline for Help to Buy loans is likely to see a mass surge of last minute transactions, followed by a huge drop-off after the deadline ends. It is irresponsible, populist politics that will likely see house prices increase further and decouple even more from income. It is likely to be the final push on the pump that sees the housing price bubble burst, leaving recent first-time buyers and purchasers in negative equity, whilst speculators swoop in on below market opportunities.”
Nick Sanderson, CEO, Audley Group: “A Stamp Duty cut is a tried and tested way to get the housing market moving. But it is a short-term fix for a housing market that has major flaws. The blanket reduction will only succeed in stimulating some parts of the market and ignores the desperate need for more targeted measures and increasing supply in areas of the housing system which are chronically underserved. This is where successive governments have fallen short and why the housing market doesn’t function as it should. The blinkered focus on first time buyers largely neglects homeowners considering downsizing or moving into housing with care and this is an area that could have a significant impact on the whole market. Liz Truss and her government have an opportunity to make a mark on the housing market, but it seems it will pass as another opportunity missed.”
Jason Rishover, CEO Heronslea Group: “Kwasi Kwarteng delivered a robust mini-budget this morning, setting out an optimistic growth plan for the UK. We are delighted with the changes made to Stamp Duty, the permanent increase in threshold from £125,000 to £250,000 is welcomed and will be a real boost to the housing market, especially for first-time buyers, many of which have delayed buying a home due to the cost-of- living crisis.”
Kamal Pankhania, CEO of property developers the Westcombe Group: “We welcome today’s announcement that the government will cut the rate of Stamp Duty through increasing thresholds at which people need to pay. The Chancellor has inherited a decades-long challenge and I would urge him to go further with reforms. For instance, exempting first-time buyers from paying the tax entirely would help support younger people who so often struggle to buy their first home. Similarly, continuing to raise the threshold at which Stamp Duty kicks in in line with average house prices increases will help ensure that more people can be exempted from paying the tax altogether.”
Steve Bangs, CEO of Lifestory: “Without doubt, today’s Stamp Duty reform will encourage more people in later life to downsize. By raising the nil-rate band to £250,000, it will go some way in encouraging many to downsize, while in turn encouraging fluidity across the market to help free up much sought-after family properties. This action alone, however, is not the silver bullet needed to support older generations. In a supply squeezed market, the fear of not finding an onwards purchase will see many people sit on their hands and put off a move, only to find their needs significantly change as the decades tick by. This is where later-living communities must take priority in the UK’s race to build enough homes.”
Caroline Comer, sales & marketing director at Comer Homes: “We welcome the review of Stamp Duty and the increase in the threshold, which we hope will drive the market, especially following another rate rise and also a looming winter of high energy prices that will have an effect on the level of activity we would normally have expected to see. We are also happy to see this amendment in place for an indefinite period, which will help drive the market and inspire confidence in purchasers.”
Santhosh Gowda, chairman of Strawberry Star: “The stamp duty cut offers a welcome stimulation to the housing industry, particularly in light of Help To Buy coming to an end, that will hopefully underpin economic growth and boost consumer confidence. It will encourage more people to move, including downsizers, which will free up family homes and allow first-time buyers to get on the ladder. This will be a major fillip to the sector which faces cooling housing prices amid rising inflation and interest rates.”
Brian Murphy, head of lending at Mortgage Advice Bureau: “This could turn out to be an excellent time to properly revisit the structure of Stamp Duty. Numerous governments have tinkered with it, but it tends to push up prices for a short period and then momentum generally mellows. It hasn’t been long since we last had a Stamp Duty break, and these things tend to generate momentum that causes a flurry of activity followed by a period of slowdown. However, the permanency of today’s announcement may temper a sudden surge of activity and allow some control of the UK property market to be regained. Still, the crux of the issue is that any changes in Stamp Duty will not address the main problem right now: a significant supply shortage.”
JLL UK head of residential and living research, Nick Whitten: “Despite the increase in the first-time buyer Stamp Duty exemption level, the likely house price growth that it will fuel could ultimately hurt those aspiring purchasers more than it helps them. And this increased affordability pressure comes at a time when their main support product Help to Buy is coming to an end. The UK is facing an acute housing shortfall – we build far too few homes to meet demand. The Stamp Duty reduction is unlikely to be the policy silver bullet to fix that.”
Lucian Cook, head of residential research at Savills: “The biggest beneficiaries of the Stamp Duty changes are likely to be first-time buyers in London and the more expensive parts of South East England, where the savings on offer will make their deposit requirements look a little less daunting. However, given a combination of recent house price growth and increases in interest rate raises this is not going to magically result in a surge of first-time buyer homebuying activity. Similarly, a maximum up front Stamp Duty saving of £2,500 for other buyers is relatively small in relation to the additional annual mortgage costs seen since the beginning of the year.”
Vanessa Hale, head of research at Strutt & Parker: “The Stamp Duty cuts, which tops out at £2,500 for those who are not first-time buyers in England and Northern Ireland, are unlikely to boost transaction volumes and help consumer confidence. However, the relief of up to £11,250 for first-time buyers will be welcome for those struggling to get on the housing ladder.”
Cormac Henderson, CEO of national home buying service Spring: “We have long been calling for a Stamp Duty break for elderly downsizers or ‘last-time buyers’, who feel stuck in unfit for purpose accommodation, so the announcement of a general Stamp Duty break is welcome news in this regard, incentivising hundreds of thousands of people to downsize and free up larger homes for those who need it most. However, ultimately our housing market has a fundamental supply-demand issue and until more homes are built at scale, the Stamp Duty cut will simply fuel more demand with more people fighting for less homes.”
Lynda Clark, CEO of First Time Buyer Group: “It’s about time the government takes housing as a subject of address. We’re less than a month away from the end of Help to Buy, but we have yet to see an alternative low-deposit scheme with the same level of oomph, though Shared Ownership is an invaluable option for many. The Stamp Duty cut could help to bring homeownership back into reach for many, while Shared Ownership, First Homes scheme and Deposit Unlock offer additional help.”
Simon Cox, managing director of Walter Cooper: “Today’s statements from the new administration about its ambition to support the economy – particularly the housing market – have been very encouraging. Cuts to stamp duty will provide a strong incentive for movement throughout the property market.”
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