The Chancellor’s first-time buyer relief is being used more than expected, and could cost nearly £1bn in its first year, experts have claimed.
Philip Hammond said in his Spring Statement yesterday that 60,000 people had benefited from the relief, which is worth up to £5,000 in stamp duty tax.
Based on the Chancellor’s claim, the first-time buyer relief has cost the Treasury up to £300m in the four months since its introduction.
"At the current run-rate, it will cost the Treasury close to £1bn in the first year," said Nimesh Shah, partner at accounting, tax and advisory practice Blick Rothenberg.
"At the Autumn Budget, the Treasury estimated the 2017/18 cost to be £125m, and by 2022/23, £670m. Today’s claim by the Chancellor that 60,000 first-time buyers have already benefitted suggests that the Government’s original figures were significantly under-estimated," he added.
The stamp duty relief was announced in the Autumn Budget, with homes under £300,000 exempt from stamp duty and no stamp duty paid on first £300,000 of the purchase price of homes worth up to £500,000.
The Chancellor said at the time that this would help 95 per cent of all first-time buyers who pay stamp duty, with 80 per cent paying none and a further 15 per cent seeing a cut to the stamp duty they paid.
But the change was immediately controversial, since the independent body in charge of analysing the public finances, the Office for Budget Responsibility, claimed it would mainly benefit sellers by pushing up property prices.
This is because it would free up money for first-time buyers to use on larger deposits, which would feed through into higher house prices.