Before today's announcement, the threshold for first-time buyers at which stamp duty is paid was £300,000.
For other buyers, the threshold has been doubled - meaning buyers will now only pay the tax above £250,000.
Stamp duty was last cut during the pandemic, raising the threshold temporarily to £500k in a move to help stimulate the property market. Truss has been vocal in the media with regards to the tax claiming that cutting stamp duty was “critical” to economic growth and that the highest rate of stamp duty lead to fewer transactions.
Yet it remains a huge source of income for the government, raising about £12bn billion a year.
Prior to today's announcement, no stamp duty was paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty was levied at 2%. Between £250,001 and £925,000 5%, rising to 10% for homes valued between £925,001 and £1.5 million. At the very top-end of the scale, anything above £1.5 million saw stamp duty paid at 12%.
As expected, the property industry was quick to react to the news. Here's what they're saying:
Tom Bill, head of UK residential research at Knight Frank, said:
“Just when you think housing demand is cooling, along comes another stamp duty cut. Together with other measures designed to boost the economy, a cut will intensify and prolong demand in the housing market. However, what the Chancellor is giving away, the Bank of England will more than take away. Many buyers will find the impact of rising mortgage rates soon eclipses the benefit of a stamp duty cut, which will keep firm downwards pressure on prices next year.
“The cost of a five-year fixed-rate mortgage has almost tripled over the last year and this upwards trajectory will continue. Almost four million first-time buyer mortgages have been issued since 2009, which is a large group of homeowners who don’t know what it’s like when monthly interest payments rise meaningfully. The gravitational forces of higher rates will bring house prices back down to earth irrespective of any stamp duty cut.”
Kamal Pankhania, CEO of property developers the Westcombe Group, said:
“We welcome today’s announcement that the government will cut the rate of stamp duty through increasing thresholds at which people need to pay. Stamp duty disproportionately affects the average buyer, and this is a welcome step which will help to stimulate the housing sector, making it easier for first-time buyers to get on the housing ladder and, most importantly, encourage the construction of more housing which is so needed across the UK.
“The Chancellor has inherited a decades-long challenge and I would urge him to go further with reforms. For instance, exempting first-time buyers from paying the tax entirely would help support younger people who so often struggle to buy their first home. Similarly, continuing to raise the threshold at which stamp duty kicks in in line with average house prices increases will help ensure that more people can be exempted from paying the tax altogether. These are the bold steps needed if we are to rise to this challenge.”
