Government to cut stamp duty in Friday's Budget

The government is set to cut stamp duty in its mini-budget later this week, according to reports.

Related topics:  Mortgages
Rozi Jones
21st September 2022
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"This move will push house prices even higher, worsening inflation and further pricing first-time buyers out of homeownership."

Whitehall sources told the Times that the plans, to be unveiled by chancellor Kwasi Kwarteng on Friday, are the “rabbit” in the budget and have been developed over the past month.

Stamp duty receipts hit £10.6bn in the first eight months of the year, according to the latest HMRC tax receipts. The amount of tax paid when buying property is 39% (£3bn) higher than the same period in 2021.

£1.6bn was paid by buyers in August alone, the second highest amount in any month on record (The most was £1.7bn in December 2021). The rates and thresholds for stamp duty were last changed by George Osborne in December 2014. Since then, average property prices in England have rocketed by more than £100,000 from £203,346 to £311,583.

Rishi Sunak temporarily reduced stamp duty during the Covid-19 pandemic, but critics argued that the move only increased the pace of house price growth.

Robin Paterson, partner at ibuyer Upstix, said: “The proposed stamp duty cuts are certainly one way to provide a short-term economic boost, but there needs to be more clarity on the terms of any deal.

"The timing of the cuts will be crucial. It cannot wait until the new year, given that the entire market - which is already an uncertain one -will be paralysed by prospective buyers waiting for their discount.

"Clearly though there needs to be wider reform to the housing market to help ensure transactions are easier to close up and down the housing ladder."

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, commented: “If the rumours of a cut to Stamp Duty are true, it’s good news for homebuyers who are being squeezed harder and harder by the tax on buying a home. Buying an average-priced home in England now comes with a stamp duty kicker of £5,579. That’s more than three times the £1,566 tax bill for an average-priced home in 2014 when the thresholds and rates were last set.

“The Treasury is now on course for yet another record stamp duty haul this year. However, while homebuyers face soaring property tax bills, the prospect of higher gas and electricity bills is a more immediate concern for most people.

“An overhaul of property tax rates and thresholds could be a win-win move for the Chancellor, but he would be missing an opportunity if it isn’t linked to an energy efficiency incentive that would help to rapidly reduce energy use in much of the UK’s housing stock and help to keep people’s long-term gas and electricity bills down.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said: "There are many bad ideas in the political Top 10 right now but cutting stamp duty is off the charts. This move will push house prices even higher, worsening inflation and further pricing first-time buyers out of homeownership. Put it this way, if someone asked me how to drive an already overheated property market into dangerous bubble territory and make things worse for everyone, this policy would be it. It’s bovine short-termism at its worst."

Emma Jones, managing director of Frodsham-based broker, When The Bank Says No, commented: "I’m not convinced this is the right step for the property market as most people are more concerned about their monthly outgoings rather than stamp duty. Daily conversations we are having are around budget and to be quite honest stamp duty is an afterthought. The stamp duty incentive was a great push during the pandemic but I can’t help but wonder if that’s what’s got us to where we are, with significant price increases, bidding wars and people now potentially exposed as they have over-borrowed. House prices are higher than ever and now mortgage rates are following. More increases in prices, which this move could trigger, will simply make mortgages even more unaffordable and prevent many people from getting on the property ladder at all."

Graham Taylor, managing director of Nailsworth-based independent mortgage broker, Hudson Rose, added: "Cutting stamp duty will appeal to the Tory faithful but ultimately won’t massively benefit those trying to get on the housing ladder. With too few properties on the market already, this move will likely push prices even further out of reach for the aspiring first-time buyer. More affordable homes is the best way to underpin and strengthen the market but this seems to be something successive governments are unwilling to invest in."

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