Anyone could be excused for not being able to keep up with all the government-imposed rule changes during the past few months.
What do landlords need to know about the new stamp duty laws in light of the mini-budget, u-turns, and new Prime Minister and Chancellor?
Stamp Duty Remained
The now-famous mini-Budget from former Chancellor Kwasi Kwarteng scared the markets, sent the pound to record lows against the dollar, and sent mortgage rates rising.
So, when his replacement, Jeremy Hunt, took over, he reversed almost everything right away. Only the changes to stamp duty stayed. This was primarily because they had already passed a point in Parliament where they couldn’t go back and because, unlike almost every other part of the fiscal address, the changes were accepted by most people.
The adjustments boosted the threshold for nil rate tax from £125,000 to £250,000 and elevated the amount at which first-time purchasers now pay stamp duty from £300,000 to £425,000 as long as the home’s overall cost is no more than £625,000. As a result of the adjustments, first-time purchasers with an eye towards more expensive first residences are likely to pay no or little stamp duty.
At the time, the government asserted that the cut in fees would permit 200,000 additional people per year to buy a home without paying any stamp duty, or around 43% of all transactions.
Additionally, it stated that the reductions will lower stamp duty rates “by up to £2,500 with first-time buyers being able to access up to £11,250 in relief” for all movers.
What do these Stamp Duty changes imply for landlords?
Landlords are also eligible for a Stamp Duty cut, but they are still required to pay the full 3% stamp duty surcharge on all purchases.
Landlords looking to buy a relatively inexpensive property (under £250,000) will now pay less stamp duty on this transaction, while those buying homes exceeding $250,000 won’t benefit from the changes.
Some have argued that the decrease in stamp duty may contribute to an increase in value of the property, preventing landlords from diversifying their holdings. On the other side, those landlords who are wanting to sell may profit from higher prices and increased demand as a result of the adjustments to the stamp duty.
The cost-of-living crises, other problems, and recent developments, which have seen interest rates soar and mortgage rates follow suit, could cancel out any savings that landlords might have anticipated from the changes to stamp duty.
How much is Stamp Duty for the first-time buyer?
The news that there will be no stamp duty for purchases up to £425,000 may have pleased renters hoping to purchase their first house. Prior to the mini-Budget, all first-time buyers were exempted from paying stamp duty on homes valued up to £300,000, but as a result, first-time buyers in more costly regions like London and the South East will likely not have to pay any stamp duty tax on their first property.
However, they will still have trouble scraping together a sizable enough down payment for their first home. Mortgage rates have increased since the mini-Budget’s release, making monthly mortgage payments more expensive than they would have been. Finding suitable mortgage agreements could become much more difficult.
Stamp Duty changes
Stamp Duty gives the government a lot of money. According to data from the government, the amount of stamp duty paid on property hit a record high in the third quarter of this year. They got to £3.59 billion, which is a 21% increase from the last quarter.
In the year ending in September, earnings were more than £12 billion, which is 28% higher than their 12-month high before the pandemic, which was £9.47 billion and set in 2017.
In his Autumn Statement last November, the Chancellor said that the cut in stamp duty would end in March 2025. It will stay in place until then because the market is likely to be slow.
The people at the top of the market and those who buy homes to rent out or as second homes and have to pay an extra 3% surcharge to bring in a lot of stamp duty money. In the 12 months leading up to September, the extra 3% surcharge brought in £528 million for the Treasury. The prices haven’t changed either.
There are always calls for stamp duty to be completely eliminated, and some people say the rates should be higher than they are now. However, stamp duty has been a big part of a number of recent major budget deals, so for the time being, the Government may focus on other priorities that are more important, so there shouldn’t be any more changes for a while.