The amount home movers pay in property taxes is set to rocket by £9.4billion in the next five years, after Chancellor Jeremy Hunt decided against cutting stamp duty land tax in today’s Spring Budget.
The Treasury is predicted to collect £12.7billion in property taxes for the 2023-24 financial year, according to Office for Budget Responsibility figures published alongside the Budget.
But by the financial year 2028-29, that is slated to rise by £9.4billion to £22.1billion – a rise of 74 per cent.
No help for movers: Stamp duty was not cut in today’s Budget, and from next year those buying a home will pay even more as the thresholds are set to change
The taxes included in that figure are stamp duty land tax, devolved property transaction taxes in Scotland and Wales and the annual tax on enveloped dwelling.
Hunt was said to have been considering a stamp duty cut in the Budget as a way of boosting the housing market, which has been hit by higher mortgage rates.
Recent seasonally-adjusted data from HMRC found that house sales and purchases fell by 12 per cent in the 12 months to January 2023.
To mitigate this negative effect, the Treasury could have opted to reduce the rate of stamp duty land tax or scrap the home-buying levy altogether.
While this would have reduced the tax taken on individual home purchases, it could have encouraged more people to move and therefore pay the tax – as well as increasing the VAT new home owners would pay on renovating their properties.
For homeowners, the current state of play is that purchases of less than £250,000 do not incur stamp duty. It is then charged at a rate of 5 per cent on the next £675,000, for homes worth between £250,001 to £925,000.
It rises to 10 per cent after that, to a top rate of 12 per cent on the portion of a home above £1.5 million.
First-time buyers do not pay stamp duty on properties under £425,000 and face a charge of 5 per cent on the portion of homes between £425,001 and £625,000.
However, those thresholds are set to change soon, which will be partly responsible for the spike in the Treasury’s stamp duty take.
In April 2025 the nil-rate band – the amount under which no stamp duty is owed – is slated to drop back to £125,000.
For someone buying a £400,000 home, that is the difference between paying £7,500 today, or £13,750 in a year’s time.
The relief for first-time buyers is also due to be stripped back at the same time, seeing them start to pay stamp duty on homes above £300,000 rather than £425,000.
According to Coventry Building Society, the average stamp duty bill in 2023 was £9,937.
Timothy Douglas, of estate agent membership body Propertymark said: ‘The Chancellor has missed the opportunity to bring in stamp duty reliefs and wider reforms to support more people to buy and sell their dream home, which comes with a guaranteed boost to the economy.’
Richard Davies, of London-based estate agent Chestertons added: ‘Stamp duty is a major financial burden on buyers that has seriously restricted the freedom with which people can trade up and down to fit their personal circumstances.
‘The Chancellor’s decision to not extend the SDLT relief for first-time buyers is disappointing news.
‘Whilst this could lead to more first-time buyers rushing to buy a property before the relief ends in 2025, it will eventually make it that much harder for future first-time buyers to get on the property ladder.’
Not included: The Chancellor did not announce a rumoured 99% mortgage scheme in the Budget
No help for first-time buyers
The Chancellor also decided against two measures he had been reported to be considering which would have offered a helping hand to first-time home buyers.
The first was a 99 per cent mortgage scheme, which would have seen the Government offer banks financial guarantees to encourage them to hand out mortgages with just 1 per cent equity.
The second was making the rules of the popular Lifetime Isa savings account more generous for first-time buyers.
The account offers savers a 25 per cent Government bonus on their savings worth up to £1,000 per year – but they must use the money for their first home or retirement.
If they are buying a home, it must be worth less than £450,000 or they will lose the bonus when they withdraw the money.
This limit has stayed the same since April 2017. If the Lifetime Isa limit had risen in line with property prices, it would sit at more than £560,000 today.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: ‘This Budget could have been an opportunity to present new innovative schemes which help buyers with affordability as well as saving for a deposit – but not even the bare minimum was done.
‘It’s not only incredibly disappointing, it feels like a big mis-step on the Chancellor’s part.
‘First time buyers are the foundation on which the rest of the housing market stands. Failing to give them proper help is failing to help the rest of the market.’
