Homebuyers in the UK could be affected by a potential stamp duty cut that is rumoured to be announced later this week. Prime minister Liz Truss and Chancellor Kwasi Kwarteng will deliver a 'mini budget' on Friday morning (September 23) where they are expected to make some major economic announcements and set out the government's plans to tackle the cost of living crisis.
It has been reported that the Prime Minister and Chancellor are likely to announce a cut in the stamp duty tax that homeowners have to pay in an attempt to help more young people get a foot onto the property ladder, reports The Times.
The news comes a year after the last stamp duty holiday which was brought in to boost the property market during the coronavirus pandemic. It was introduced back in July 2020 by former Chancellor Rishi Sunak and ended in September 2021.
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What is stamp duty tax?
Stamp Duty Land Tax (SDLT) is a tax that is charged when you purchase a property or land over a certain price in England and Northern Ireland.
Stamp duty can add thousands of pounds to the homebuying process, but you only pay it if your home is over a certain threshold.
According to Gov.uk, you pay the tax when you buy a freehold property, buy a new or existing leasehold, buy a property through a shared ownership scheme or are transferred land or property in exchange for payment, for example you take on a mortgage or buy a share in a house.
How much do you have to pay?
The average stamp duty that a homebuyer pays is currently £8,258 based on the average asking price of £365,173, according to Rightmove.
Stamp duty only applies over a certain threshold and if you buy a home for less than the threshold, there is no tax to pay.
The current stamp duty threshold for residential properties is £125,000 and the threshold for non-residential land and properties is £150,000.
Seven per cent of homes on the market are currently exempt from stamp duty for all homeowners, excluding second homes, for properties priced at £125,000 or below.
First-time buyers get a discount on their stamp duty tax, meaning they'll pay less or no tax, if the purchase price of their property is £500,000 or less. 45 per cent of homes on the market are currently exempt from stamp duty for first-time buyers.
If you’re buying a residential property there are also different rates of stamp duty tax if you already own a property and you’re buying an additional property or you’re not a UK resident
You can use HM Revenue and Customs’ Stamp Duty Land Tax calculator to work out how much tax you’ll pay.
How would a stamp duty cut affect homebuyers?
A stamp duty cut could mean first time buyers and other residential homebuyers will not pay any tax on their properties, however nothing has been confirmed by the government as of yet.
It also isn't clear how much stamp duty could be cut by - and if it would benefit first-time buyers or other homebuyers more.
Rightmove’s property expert Tim Bannister says: “With demand starting to soften slightly over the past few months, and headwinds anticipated to grow as 2022 draws to a close and we enter 2023, any help to reduce the cost of moving will no doubt be welcomed by buyers if a stamp duty cut is announced on Friday.
“Sellers who may have been considering listing their property for sale may be encouraged to push on with their plans given the potential for increased demand, in turn bringing much needed stock to a currently supply constrained market.
“If the cuts benefit homes in higher price brackets it would help those trading up more than it would help first-time buyers. With rising interest rates and cost of living it could be welcome to those looking for a bit more buffer to find the home they want, but if prices rise further then then that extra money could quickly be swallowed up.
“The impact on supply, demand and ultimately prices will depend on the detail, including if it will it extend to second-home buyers and investors.”
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