HOUSE THAT
Huge stamp duty change from TOMORROW revealed in Rachel Reeves’ Budget
Watch Rachel Reeves reveal key changes to stamp duty in the Commons
A HUGE change to stamp duty has been revealed by Rachel Reeves in today's Budget - and it will come into force tomorrow.
The Chancellor's stamp duty rise won't affect first-time buyers but it will impact landlords and people looking to buy a second home.
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Stamp duty is one of the additional upfront taxes that purchasers can incur when buying a property.
In the Autumn Statement today, Ms Reeves revealed that second-home buyers will face a stamp duty rate rise of two percentage points – from 3% to 5% – starting from tomorrow (October 31).
It is hoped that by discouraging people to buy second homes, it will be easier for first-time buyers and home movers to access affordable proprieties.
Speaking in the Commons, Ms Reeves said: "In our manifesto, we committed to reforming stamp duty land tax to raise revenue while supporting those buying their first home.
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"We are increasing the stamp-duty land tax surcharge for second-home, known as the “Higher Rate for Additional Dwellings", by two percentage points, to 5%, which will come into effect from tomorrow.
“This will support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years."
The announcement comes as the Chancellor confirmed a raft of other changes during her maiden Budget speech.
The "trick and treat" Halloween package included:
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- A freeze to fuel duty for a 15th consecutive year in a win for The Sun's Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour's flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to "get back to work"
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer's Allowance to give cash to 60,000 more carers
The increase to the stamp duty land tax surcharge is bad news for landlords and could affect buy-to-let residential properties.
Cheaper pints, surprise wage boost & fuel duty freeze in Budget – but £40BILLION tax blitz will pay for it
Richard Donnell, head of research and insight at Zoopla, said: "The extra 2% cost on buying second homes and investment property will reduce demand from second home buyers and investors.
"Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes.
"This is resulting in a higher level of selling by second home owners. In areas with above average second homes we have seen four times more homes come to the market."
But Stevie Heafford from Tax Partner described it as a "bold move".
He added: "This will have an impact on the property market particularly for individuals who are in the process of selling their first home after acquiring their new main residence."
What is Stamp Duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Land is transferred to you or property in exchange for payment, for example, you take on a mortgage or buy a share in a house
The rate you pay depends on the price and type of property and certain thresholds.
If you are a first-time buyer no stamp duty is due if the property is worth £425,000 or less.
You'll also get a discount if the purchase price is £625,000 or less and will only pay 5% SDLT on the portion from £425,001 to £625,000.
Those who aren't first-time buyers will pay different rates depending on the value of their new home:
- If it's up to £250,000 - no stamp duty is paid
- For the next £675,000 (the portion from £250,001 to £925,000) - stamp duty is charged at 5%
- For the next £575,000 (the portion from £925,001 to £1.5million) - stamp duty is charged at 10%
- For the remaining amount (the portion above £1.5million) - stamp duty is charged at 12%
For example, if you are buying a home worth £300,000 you would pay stamp duty at a 5% rate on the £50,000 - £2,500.
You'll usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one.
Are there any stamp duty changes for first-time buyers?
The announcement comes as first-time buyers are set to pay more from next year.
Currently, first-time buyers are exempt from paying stamp duty on properties priced up to £425,000.
If a property is more expensive they only pay tax at 5% on the portion above £425,000 and up to £625,000.
As a result, 80% of first-time buyers are not liable for any stamp duty, while only 14% are required to pay a reduced rate, according to property site Zoopla.
The lower limit for the first-time buyer stamp duty exemption was temporarily increased in 2022, but is scheduled to revert to £300,000 in April 2025.
Similarly, the threshold at which all other buyers begin to pay stamp duty was raised from £125,000 to £250,000.
This increase is also set to expire in April next year.
Brian Byrnes, head of personal finance at Moneybox, said: "While the Chancellor has no doubt had some difficult choices to make, the decision not to extend the current stamp duty relief beyond next March is a blow for first-time buyers at a time when affordability is already a key obstacle."
The Chancellor also confirmed an increase in the National Minimum and National Living wages, a rise in the Carer's Allowance earnings limit and a major crackdown in the benefits system.
Sun Money's Stamp Duty analysis
IN a bitter blow for first-time buyers, the stamp duty threshold will fall back to £300,000 in April.
explains what it means for prospective buyers.
It was hoped the Chancellor would make the current higher exemption of £425,000 permanent after it was raised in 2022, however, Rachel Reeves decided against the move.
Buyers now face a race against the clock if they want to avoid paying more when taking their first step on the property ladder.
A first-time buyer purchasing a £425,000 property today won’t pay any stamp duty but after April next will face a bill of £6,250.
The government estimates that an increase in second home stamp duty will support an extra 130,000 purchases by first-time buyers.
But this could be small comfort for buyers faced with having to save thousands of pounds extra to pay stamp duty
How much is stamp duty?
The amount of SDLT you have to pay depends on the price of the home you are buying and the type of property it is.
If you buy a property for less than £250,000 there’s no stamp duty to pay.
If you are a first-time buyer no stamp duty is due if the property is worth £425,000 or less.
You'll also get a discount if the purchase price is £625,000 or less and will only pay 5% SDLT on the portion from £425,001 to £625,000.
Those who aren't first-time buyers will pay different rates depending on the value of their new home:
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- If it's up to £250,000 - no stamp duty is paid
- For the next £675,000 (the portion from £250,001 to £925,000) - stamp duty is charged at 5%
- For the next £575,000 (the portion from £925,001 to £1.5million) - stamp duty is charged at 10%
- For the remaining amount (the portion above £1.5million) - stamp duty is charged at 12%
For example, if you are buying a home worth £300,000 you would pay £2,500 in stamp duty - the equivalent of 5% of £50,000.
BRITAIN’S MOST MEMORABLE BUDGETS
Today is the first Labour budget for 14 years - and the first ever to be delivered by a female Chancellor.
Brits are bracing for a raft of tax hikes as Rachel Reeves tries to plug the "£22billion black hole" she says she's found in government accounts.
Here are five other budgets which have caused a stir over the years.
1979 - Geoffrey Howe, Conservative
Margaret Thatcher's Chancellor Geoffrey Howe slashed both the top rate of income tax and the standard rate.
He also doubled VAT - shifting the tax burden from income to consumption in a huge change for Brits.
Howe also eased controls on foreign exchange in a bid to control inflation.
The budget signalled a massive break from the last Labour government and set the pattern for decades to come.
1988 - Nigel Lawson, Conservative
Nigel Lawson (dad to domestic goddess Nigella) massively slashed income tax again.
The deputy Commons speaker twice cleared the chamber amid noisy protests from Labour MPs slamming the tax cuts.
Lawson also set off a property bonanza by announcing an end to double mortgage tax relief for couples buying homes.
1993 - Norman Lamont, Conservative
In March 1993 the economy was still reeling from Black Wednesday, when the pound crashed out of the European exchange rate mechanism.
Lamont announced tax rises including VAT on domestic gas and electricity.
Later that year Lamont's successor Ken Clarke froze personal tax allowance and brought in stealth taxes on insurance and plane passengers.
The Lamont and Clarke budgets marked the end of the Tories's scything tax cuts - and set the stage for Labour's return to office in 1997.
2002 - Gordon Brown, Labour
Brown raised national insurance by a penny on the pound to fund higher spending on the NHS.
The future PM had fretted over a possible backlash from voters who had re-elected Labour in 2001.
But he managed to pull off the largest rise in health spending in the history of the NHS.
2009 - Alistair Darling, Labour
Labour's last budget before today came amid the credit crunch and soaring unemployment.
Darling ramped up taxes and borrowing in a bid to fill up draining Treasury coffers.
Tory leader David Cameron blasted Labour's 'utter mess' - and was in power a year later.
2022 - Kwasi Kwarteng, Conservative
Kwarteng unveiled his economic package less than a month after becoming Liz Truss's Chancellor.
Technically, it was a fiscal statement rather than a budget - but it turned out to be just as seismic.
Rising Tory star Kwarteng announced £45billion in tax cuts including a drop in all rates of income tax.
Markets took frights and the pound went into freefall before the Bank of England waded in to stop a run on UK pension funds.
Mortgage rates soared and Kwarteng was out of the job just three weeks later.
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