Government announces changes to Stamp Duty in mini-budget
What are the new Stamp Duty rules and how does it affect first time buyers?
The government has announced a cut to Stamp Duty Land Tax (SDLT), affecting thousands of budding buyers across England and Northern Ireland by increasing the amount that a purchaser can pay for a residential property before they are required to pay SDLT.
What is Stamp Duty Lax Tax?
Stamp Duty Land Tax is a tax paid by purchasers when buying a property. The amount paid will vary depending on a number of factors including the price of the property and if you’re a first time buyer.
How has Stamp Duty changed?
As part of the government’s mini-budget, Chancellor Kwasi Kwarteng announced the permanent changes to Stamp Duty. The measures which came into effect straight away are:
- The SDLT threshold has been raised from £125,000 to £250,000.
- The threshold for first time buyers, meaning those who have never owned a home in the UK or abroad, has increased from £300,000 to £425,000.
- The value of a property which first time buyers can claim Stamp Duty relief on has increased from £500,000 to £625,000.
These changes are part of the government’s commitment to supporting homeownership and promoting mobility in the housing market, in turn supporting economic growth.
How will Stamp Duty costs work?
The amount of Stamp Duty you pay depends on the cost of the property.
The new SDLT rates are as follows: £0 to £250,000 (0%), £250,000 to £925,000 (5%), £925,000 to £1,500,000 (10%) and over £1,500,000 (12%).
As an example, under these changes, if a purchaser buys a home worth £250,000, they will no longer need to pay £2,500 in Stamp Duty fees as it was previously charged at 2% between £125,000 and £250,000.
Do you pay Stamp Duty on Shared Ownership homes?
If purchasing a Shared Ownership home, buyers have a couple of different options for paying Stamp Duty on the property.
Firstly, buyers can choose to only pay Stamp Duty on the share that they’re purchasing. This will reduce the costs incurred at the time of purchase but means that costs may be higher if they go on to buy 80% or more of their home through the ‘staircasing‘ process.
Alternatively, purchasers can pay on the full value of the property at the outset. Choosing to pay the Stamp Duty in full is often a good option if the full property value is below the standard tax-free allowance of £250,000, or £425,000 for first time buyers who will receive a relief up to this amount.
To find out more about Stamp Duty and the costs associated with buying a Shared Ownership home, please visit our costs page.
Register with Share to Buy to be kept up to date with all developments regarding first time buyers products and housing options such as Shared Ownership and Help to Buy. You can also start your property search on Share to Buy’s portal today!