Prime Minister Liz Truss has cut the tax on moving homes in her “mini” budget published today.
Of great interest in the legal field is the Stamp duty land tax (SDLT). SDLT is a tax paid to the government by the buyer of a home (or land) over £125,000 or a second home or land over £40,000 in England and Northern Ireland.
PM Liz Truss is attempting to drive economic growth by enabling more first-time buyers to get on the property ladder and boosting property transactions. She aims to stimulate further growth in the property market and help more young people buy their first home.
The Prime Minister said: ‘I’ve been very clear that as well as keeping taxes low, we need to put in place measures that are going to drive growth in the economy. And that’s my priority- we’ve had relatively low growth for several decades’.
However, critics have said that the move would make the housing crisis ‘even worse’. Former chancellor Rishi Sunak introduced a stamp duty holiday in 2020 in an effort to cushion the property market from the impact of the pandemic. Economists said the policy did more harm than good for buyers. The coronavirus pandemic and lockdowns also saw homeowners evaluate their living situation and make a move based on their new priorities; whether that’s an extra room for working from home or more outdoor space due to travel no longer being so integral to day-to-day lives.
However, rising interest rates on mortgages and the cost-of-living crisis generally have led HSBC to warn earlier this month that the UK is on the ‘cusp of a housing downturn’. Presumably, this is at the forefront of Ms Truss’ mind in rushing through this decision.
Ms Truss has previously said she is willing to be an unpopular prime minister to bring in measures she believes will grow the economy, admitting her tax cuts will disproportionately benefit the rich, and argues she needs to make difficult decisions under her political and economic gamble to focus on growth.
How much you will now pay depends on whether the land or property is residential use or non-residential, second property or mixed use. But the main change for is for first time buyers and is based on a relief which you can claim.
You can claim a discount (relief) if the property you buy is your first home at the following rate:
- no SDLT up to £425,000; and
- 5% SDLT on the portion from £425,001 to £625,000
You are eligible if you and anyone else you’re buying with are first-time buyers.
As an example, if you’re buying your first home;
- 0% on the first £425,000 = £0
- 5% on the remaining £75,000 = £3,750
- total SDLT = £3,750
At Aston Bond, we want to ensure that clients are made aware of the changes and advise accordingly. The changes are said to mean that some 200,000 people will be lifted from paying SDLT each year. Currently, these changes are being implemented indefinitely so there is no specific deadline which will cause a conveyancing spike as last year. However, whether the changes will push property prices even further up remains to be seen.
For any assistance with conveyancing or any property matters, please contact our team.