Home Lifestyle Rishi’s Budget saves Stamp Duty misery for thousands of buyers

Rishi’s Budget saves Stamp Duty misery for thousands of buyers

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We already roughly knew what was coming; an extension to stamp duty and the re-introduction of low deposit government-backed mortgages to help those with smaller deposits get onto the ladder. Today’s Budget simply filled in the missing details.

The current measures mean that the first £500,000 of any residential property transaction doesn’t attract any Stamp Duty liability, resulting in a maximum saving of £15,000 which following today’s announcement will now be extended from the current deadline of the end of March, to the end of June.

From July, the exemption amount will be reduced to £250,000 meaning that the maximum saving available will be £2,500 until the end of September, when the scheme will revert to the previous £125,000 exemption in October. This means that a significant number of movers still won’t pay any SDLT for moves completed before 1st October, given that the current average house price is £231,068 according to the latest data released by lender Nationwide yesterday.

For the hundreds of thousands of home movers currently in the process of buying and selling, today’s news will probably provide an element of very welcome breathing space. According to property data company TwentyCi, there are currently 580,699 residential sales in progress with fears that of these, potentially 374,000 would not have completed their transaction by the previous 31st March deadline.

Another key announcement today was the re-introduction in April of Government-backed low-deposit mortgages, similar to the previous scheme that was introduced in 2013 and scrapped in 2017.

These 5 per cent deposit deals can be used for purchases of up to £600,000 by first-time buyers and home movers. Initially, they will be offered from by high street lenders including Lloyds, NatWest, Santander, Barclays and HSBC, with other lenders such as Virgin Money following soon afterwards.

Aside from the two ‘box office’ announcements, two further elements included in today’s Budget may impact other areas in the property sector, although not perhaps as obviously at first pass.

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Mr Sunak announced that the current Inheritance Tax threshold will be held until April 2026. Albeit a one-liner in his speech, it may herald a significant change in the way that intergenerational wealth is passed down through families in the future, with property forming the bulk of most windfalls.

For those landlords who hold their property portfolios in Special Purpose Vehicles (SPVs) the changes announced to Corporation Tax today may also have significant implications. From April 2023, Corporation Tax will increase to 25 per cent for companies with annual profits of over £250,000. For smaller businesses with annual profits of less than £50,000 the current rate of 19 per cent will remain the same, with a taper system introduced for companies with annual profits of between £50,000 and £250,000.

As the property sector digests the details from today, of course the big question now is what, if any, effect this will make to the housing market in both the short and mid-term.

Andrew Montlake, mortgage expert and Managing Director of London mortgage broker Coreco suggests: “The extension and phasing out of the Stamp Duty holiday, coupled with Government backing of 95 per cent loan-to-value mortgages, will widely be applauded but we shouldn’t forget that both measures will keep prices stubbornly high.”

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Andrew continues: “More people will be able to get onto the ladder but the first rung on that ladder will be a lot higher up, putting more financial pressure on buyers. It’s good news in the short-term but in the long-term the inflationary effect on prices and extra debt people are taking on could have a sting in the tail. Generation Rent will indeed now have more chance to become Generation Buy, but they will be buying high.”

Jeremy Leaf, former RICS residential chairman observes:  “As always with Budgets, it is just as much what’s in it as what’s not, or emerges in the small print soon after, which counts.”

“The biggest test is does the Budget help maintain or even improve the number of transactions and investment without adding to upwards pressure on prices? And at the same time encourage the building of more new homes, particularly affordable ones? I have to say the Chancellor probably gets ‘B’ or ‘B-minus’ on his report card as the Stamp Duty extension, including the tapering, is welcome but there will be another mini cliff-edge in the autumn when this latest holiday finally comes to an end.”

Jeremy adds: “In particular, the reduction in the Affordable Homes Programme, which is cutting the number of social rented homes, is of particular disappointment. The other regret is the lack of support for tenants, apart from those supported by the now extended furlough scheme. The Chancellor could have done something to reduce the inevitable number of evictions which will occur when the ban is eventually lifted.” 

Andrew continues: “More people will be able to get onto the ladder but the first rung on that ladder will be a lot higher up, putting more financial pressure on buyers. It’s good news in the short-term but in the long-term the inflationary effect on prices and extra debt people are taking on could have a sting in the tail. Generation Rent will indeed now have more chance to become Generation Buy, but they will be buying high.”

Jeremy Leaf, former RICS residential chairman observes:  “As always with Budgets, it is just as much what’s in it as what’s not, or emerges in the small print soon after, which counts.”

“The biggest test is does the Budget help maintain or even improve the number of transactions and investment without adding to upwards pressure on prices? And at the same time encourage the building of more new homes, particularly affordable ones? I have to say the Chancellor probably gets ‘B’ or ‘B-minus’ on his report card as the Stamp Duty extension, including the tapering, is welcome but there will be another mini cliff-edge in the autumn when this latest holiday finally comes to an end.”

Jeremy adds: “In particular, the reduction in the Affordable Homes Programme, which is cutting the number of social rented homes, is of particular disappointment. The other regret is the lack of support for tenants, apart from those supported by the now extended furlough scheme. The Chancellor could have done something to reduce the inevitable number of evictions which will occur when the ban is eventually lifted.” 

Tom Bill, Head of UK Residential Research at Knight Frank, believes that the extension and taper of the Stamp Duty holiday are ‘fair’ because completion dates for buyers and sellers have been jeopardised through no fault of their own. He says: “The conveyancing system has simply been overwhelmed by the volume of transactions since the market re-opened last May. The three-month taper until October will make any cliff-edge in June feel less steep but we would still expect a surge in activity to capitalise on the full saving.”

Tom concludes: “Ultimately, there needs to be some finality, whether in terms of the end-date or by making the holiday permanent. The housing market has exceeded expectations over the last year but it needs to revert to normal seasonal patterns of activity and a balance between supply and demand that revolves around the calendar year and not the tax year. Any continued speculation around the end of the holiday would prove more damaging for the housing market than the end itself.”

With the Furlough scheme now running until October, it’s possible that a similar extension of the Mortgage Payment Deferral scheme may be confirmed, although as yet nothing has been announced.

In the meantime, expect traffic to peak on the various property search websites over the next few days as buyers who suddenly have slightly more time to save thousands swing into action.

You can hear more from Louisa on the latest episode of The Property Show Podcast



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