Last week the Chancellor of the Exchequer Kwasi Kwarteng delivered the first mini-budget of Prime Minister Liz Truss’ government.
The Conservatives’ low-tax approach has been cemented by the new economic policies that are designed to boost the country’s economic through the current inflationary environment.
The top 45% rate of income tax was cut, while the National Insurance hike from February was reversed, putting “more money in people’s pockets”. However, one of the biggest moves was the “permanent” stamp duty cut – rather than a temporary holiday which spurred the market on throughout the COVID pandemic.
Despite the mixed reaction to the overall budget, the stamp duty cuts have been praised by the property sector and look to keep the market afloat during a difficult time. In this week’s blog, we’re exploring the impact on the mini-budget will have on the property sector.
Stamp Duty Cut
Prior to the changes, only the first £125,000 of a purchase was not eligible for stamp duty land tax (SDLT), and all the thresholds above this point have been raised, cutting the tax bill for homebuyers. The level at which stamp duty becomes payable will double to £250,000 from £125,000, which will mean a saving of £2,500 for all buyers. Where first-time buyers are concerned, the stamp duty cut is even more extreme, with no SDLT payable up to £425,000, and a 5% rate on the portion from £425,001 to £625,000.
For property investors, the 3% second home surcharge still remains. So 3% will be payable on any property up to the value of £250,000, and 8% on the next £675,000 (the portion from £250,001 to £925,000), and so on. The stamp duty cut will still prove beneficial, though, for most buyers.
A vision for growth
According to Knight Frank‘s Liam Bailey, every existing property sale (excluding new-builds) contributes to GDP by a net £9,559. This includes renovations, spending on household goods, removals, surveys, agency fees and more. Every 100,000 property transactions also supports more than 11,500 jobs, says Bailey, which is based on previous Knight Frank research with the Home Builders Federation.
The government’s vision with these tax cuts and changes is to support the country’s economic growth – and as illustrated by the aforementioned figures; one of the biggest drivers of this in the UK is housing market activity. By keeping the sector moving and encouraging buyers, this will be a driver for the economy.
At Targetfollow, we welcome the Chancellor’s announcement and believe it is good news for purchasers – particularity first time buyers. The strategy demonstrates the Government’s vision to unlock homeownership for a new generation and will allow more people to afford to get on the property ladder.