- Stamp Duty Land Tax (SDLT): Good News for First Time Buyers?
As most will now be aware, on 22 November Chancellor Philip Hammond unveiled changes to Stamp Duty Land Tax (SDLT) as part of his autumn Budget. Solicitor Emily Farrow and conveyancer Karen Pratt, members of Blandy & Blandy LLP’s award winning Residential Property team, explain…
The Chancellor has abolished SDLT on homes under £300,000 for first time buyers. First time buyers are expected to save an average of £1,600.
The relief comes into immediate effect, meaning that first time buyers completing on or after the 22 November 2017 will benefit.
Following the changes, first time buyers purchasing a property for £300,000 or less will pay no SDLT. Those buying properties worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000 and a rate of 5% on the amount above £300,000. For example, if a property is purchased for £350,000, £50,000 will be taxed at 5%. No relief is available for those purchasers buying for over £500,000.
Examples showing the different SDLT charges in the new and previous systems are set out below:
|Purchase price||Old Stamp Duty (SDLT) charge||New Stamp Duty (SDLT) charge|
A lack of relief on properties valued at over £500,000 may result in those valued at close to that figure being priced more attractively and just under that threshold, to incentivise buyers. For example, a buyer paying £500,001 for a property would incur an SDLT charge of £15,000, £5,000 more than a buyer paying £500,000.
The property to be purchased must be the main residence of the purchasers in order to benefit from the relief. The definition for first time buyers is such that the purchaser must not have owned any major interest in any other property anywhere in the world. If the property is purchased jointly, all purchasers must satisfy the requirements.
In contrast to the Chancellor’s positive message, the Office for Budget Responsibility has said it believes that the changes will fuel an increase in house prices.
In a published statement, the OBR said: “We assume that a temporary relief would feed one-for-one into house prices, but a permanent one will have twice that effect. On this basis, post-SDLT [stamp duty land tax prices] prices paid by first time buyers would actually be higher with the relief than without it. Thus the main gainers from the policy are people who already own property, not the first time buyers themselves.”
For further information or legal advice, please contact a member of our leading Residential Property team.
This blog article was produced with support from Karen Pratt.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.