The government has announced a permanent cut to Stamp Duty Land Tax (SDLT) from today (September 23) which means no-one will pay the tax on the first £250,000 of their property price.
Previously, home buyers were spared the tax on the first £125,000 of their property price.
As well as doubling the minimum threshold, chancellor Kwasi Kwarteng has also changed the bands of relief for first-time buyers
From today, first-time buyers will not have to pay any stamp duty tax on the first £425,000 of their property price. Previously, they were entitled to relief on the first £300,000.
This means a 5 per cent stamp duty tax applies to first time buyers on the portion of their property between £425,001 and £625,000. Previously, this band was £300,001 to £500,000.
Kwarteng said his tax cuts will take 200,000 more people, including 60,000 first-time buyers, out of the stamp duty entirely.
In his mini-Budget today, he added that higher taxes have lowered UK growth, and that the tax burden had reached its highest level since the late 1940s. "We are determined to break that cycle. We need a new approach."
Govt's new Stamp Duty Land Tax (SDLT) bands
Source: HW Fisher
During the pandemic, former chancellor Rishi Sunak introduced a stamp duty holiday to stimulate the housing market. It was in place from June 2020 to June 2021.
The holiday enabled first-time buyers to avoid stamp duty land tax on up to £500,000 of a house purchase and on average, saved individual buyers £15,000.
The rates and thresholds for Stamp Duty Land Tax were last changed by George Osborne in December 2014. Since then, house prices have surged on average by more than £100,000.
This has prompted some in the industry to call for changes to the tax bands so they better reflect the current market.
Coventry Building Society’s intermediary relationships head, Jonathan Stinton, said earlier this week: “Buying an average-priced home in England now comes with a stamp duty kicker of £5,579.
“That’s more than three times the £1,566 tax bill for an average-priced home in 2014 when the thresholds and rates were last set.”
As well as cutting stamp duty to help more first-time buyers onto the housing ladder, Kwarteng also announced an imminent new bill intended to "unpick" what he called the "complex patchwork of planning restrictions and EU-derived laws" which he believes are holding back the UK's supply side.
Many in the industry have called for urgent measures to solve the chronic shortage in housing, after planning reforms have been shelved by former housing ministers.
In the government's Growth Plan published after Kwarteng's speech in the commons, it said The Department for Levelling Up, Housing and Communities will set out more detail on the planning offer later this autumn.
"This will include detail on the level of deregulation and the streamlined mechanism for securing planning permission," it read.
It said there will also be "designated development sites" to deliver growth and housing.