The government’s decision last November to remove Stamp Duty for first-time buyers spending £300,000 or less on their purchase had a mixed reception. Many believed that it wouldn’t have a material impact on their chances of getting onto the housing ladder.
However, recent reports show would-be homebuyers having benefitted from the move. The National Association of Estate Agents reports that it’s having the desired effect, with the proportion of sales to first-time buyers rising in February to 29% from 27% in January. Their members also noticed that some people are delaying making their purchase, opting instead to save for longer in order to maximise the full amount of Stamp Duty relief.
Following the government’s announcement, a spokesman from the Number 10 press office defended the cut, claiming that 16,000 first-time buyers had already made a saving of £5,000, estimating that more than 1m more would benefit over the next five years. They also said that the cut means that 80% of all first-time buyers would pay no Stamp Duty under the rule change.
The Chancellor, Philip Hammond, recently announced that 60,000 purchasers had benefitted from the change. The Office for Budget Responsibility said the scheme had also been used to purchase higher-priced properties, making the tax relief even more generous. In addition, low mortgage rates, high levels of employment, and government schemes such as Help to Buy, are all helping first-time buyers enter the housing market.
How the change in Stamp Duty helps
Those purchasing a £300,000 property are set to save the most, benefiting by £5,000. However, there are also substantial worthwhile savings to be made on less expensive homes. Purchasing a property worth £208,000, the average price paid by a first-time buyer, would previously have given rise to a Stamp Duty payment of £1,660, but a first-time buyer will now be able to save this amount.
For properties costing up to £500,000, first-time buyers pay no Stamp Duty on the first £300,000 but would pay duty on the balance of £200,000. On purchases over £500,000 standard Stamp Duty rates apply with no relief.
More homes coming to the market
There are also signs that some buy-to-let landlords are releasing properties back onto the market following the introduction of tax changes that reduce the tax relief on mortgage interest.
Some commentators have called for the government to do more to tackle the UK’s chronic housing shortage. The government has announced a series of measures designed to fix what they see as “the broken housing market” and set itself the target of building 1m extra homes by 2020.
Your home may be repossessed if you do not keep up repayments on your mortgage.