Stamp duty scrapped for first-time purchases under £300,000

Pinewood Crescent

While estate agents and property experts had little to digest from the Budget 2017 last week, Chancellor Philip Hammond did announce right at the end that stamp duty land tax will be scrapped immediately for all first-time buyers purchasing a home of up to £300,000, while no stamp duty will be charged on the first £300,000 for properties valued up to £500,000.

In his announcement, Philip Hammond revealed that the change will mean 95% of all first-time buyers will see the level of stamp duty they have to pay cut, while 80% of first-time buyers will pay no stamp duty tax at all. The laws apply in England, Wales and Northern Ireland up until at least March 2018; Scotland has its own independent land tax so the changes will not take place there. Stamp duty will be devolved to Wales in March 2018, and to-date, the Welsh Government hasn’t announced whether these stamp duty changes will stay in place, or if previous models will again become law.

Before the changes, and for non-first-time purchases, stamp duty land tax is charged on all residential properties worth more than £125,000 at a staggered rate above the threshold. The current rates are as follows:

  • £0 - £125,000 - 0%
  • £125,001 - £250,000 - 2%
  • £250,001 - £925,000 - 5%
  • £925,001 - £1.5 million - 10%
  • £1.5 million and above - 12%

House prices could rise because of stamp duty changes

The Chancellor insisted that the change will benefit young people, and said that the changes deliver on the government’s pledge to help the next generation realise their dream of home ownership. However, property experts and estate agents have warned that the changes are likely to see property prices increase as a result.

The Office for Budget Responsibility (OBR) has said that the main beneficiaries of the change would be existing homeowners as house prices are likely to rise by about 0.3% within a year. What’s more, the OBR expects only an additional 3,500 first-time buyer purchases as a result of the change.

Estate agents have also said that the stamp duty changes will have regional differences. The current average stamp duty land tax bill for first-time buyers is around £2,700, but in many parts of the UK, first-time buyers will see no saving at all. In the North of England for example, the average stamp duty bill is just £11.82, because the average house price in this region is just above the threshold of £125,000. However, first-time buyers who can afford £500,000 homes (mainly in the south) are likely to see the biggest savings, up to £5,000, again highlighting the serious north/south divide which is currently gripping the UK property market. Analysts have said that the government appears to once again be favouring the south over the north.

Tom Kibasi from the Institute of Public Policy Research has said that un-affordable house prices are the real issue facing young people today, not stamp duty charges. The biggest issue facing first-time buyers is the deposit payments required, with the UK average deposit currently standing at £32,899 according to Halifax. Mr Kibasi said that the stamp duty change will make little difference to young first-time buyers, but will benefit current homeowners who could see property prices rise.

Here at CPS Homes estate agents, we’re experts at helping people buy and sell properties. Whether you’re a first-time buyer or someone looking to move up the ladder, our property services can help. Find out more by popping into one of our three Cardiff branches, calling 02920 668585, or emailing enquiries@cpshomes.co.uk.

29 November 2017

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