Help for house buyers: what the new ‘mini-budget’ means

On Friday 23rd September 2022, the Chancellor of Exchequer, Kwasi Kwarteng, announced a big shake-up in terms of taxes for UK citizens, as a response to the ongoing cost of living crisis

The UK’s new cabinet has made a number of economic changes, notably reducing the rate of Stamp Duty Land Tax (SDLT) in England and Northern Ireland. This means that homebuyers will not have to pay stamp duty on the first £250,000 of the property value, doubling the previous threshold of £125,000.

First-time buyers have also benefited from targeted tax relief, as the SDLT threshold for them has increased from £300,000 to £425,000.

How does this affect homebuyers?

In terms of how this affects those looking to purchase a home, while decreasing SDLT does lower the amount that they pay at the outset, it could have the potential to increase mortgage rates. If the Bank of England predictions on inflationary pressures prove correct as a result of these budget measures, interest rate rises are inevitable.

These are issues to take into account when deciding to move home, as while you may initially be able to afford the place you want to live in with a mortgage loan, the rate that your mortgage company charges could increase significantly in the medium term and mean that you may find it much harder to keep up with your repayments. 

What this does to the housing market

This is not the first time that the government has announced a stamp duty change to help those buying a home. The last time changes to stamp duty were made was during the pandemic. This was to support those who had financial issues due to Covid, and to give a boost to the property market.

Boris Johnson’s government announced a stamp duty ‘holiday’; this meant that no stamp duty was payable on the first £500,000 of a property which definitely helped to ease the stress of purchasing a home. This was subsequently lowered to the first £250,000 from 1 July until 30 September 2021.

This SDLT relief is believed to have boosted both average UK house prices and increased interest in moving. The Office for National Statistics (ONS) shows that the annual inflation rate in the UK is higher now than it has been since May 2003.

So while this new Stamp Duty change will make purchasing a home more accessible, house prices may well increase as the market becomes more competitive with more potential buyers in the market.

Overall, this may just make it even more difficult to buy a home, but only time will tell.

New Stamp Duty rates

The new rates that were announced last week are as follows:

• 0% on property worth £0 – £250,000 (up to £425,000 for first-time buyers);
• 5% on property worth £250,000 – £925,000;
• 10% on property worth £925,000 – £1,500,000; and
• 12% on property worth over £1,500,000.

There is also discounted stamp duty for first-time buyers on properties up to £625,000, an increase from the previous £500,000.

For example, if you were looking to buy a freehold residential property for £500,000 as a first-time buyer, you would pay an additional £10,000 on top of the purchase price for Stamp Duty Land Tax. If however, it was not your first property and you are buying it as an additional home, you would have to pay an extra £30,000. This is to discourage buyers from owning multiple properties and to allow as many UK residents as possible to own their own homes.

You can check how much you would pay prior to completing a sale using the Stamp Duty Land Tax calculator.

Help with the legal side of moving

For conveyancing quotes and advice on how you can take advantage of the reduction in SDLT to buy – or sell – property, contact us today.