The UK property market is breathing a collective sigh of relief this afternoon amid confirmation of stamp duty changes by the Chancellor of the Exchequer. Initially it was expected that stamp duty reductions would be introduced with the autumn budget but they have been brought forward. Amid fears that the UK property market would stall as buyers waited for the stamp duty reduction, the government’s hand was forced somewhat. So, how will this assist the UK property market?
Stamp duty terminology
The changes for England and Northern Ireland have come into effect immediately although we wait confirmation regarding Scotland and Wales. It is worth noting that different areas of the UK use different terminology when describing property stamp duty:-
• England and Northern Ireland – Buyers pay Stamp Duty Land Tax
• Scotland – Buyers pay a tax known as the Land and Buildings Transaction Tax
• Wales – Buyers pay a Land Transaction Tax
So, effectively all of the above descriptions relate to stamp duty on property purchases. The fact that property taxes are devolved from Westminster means that Scotland and Wales will be announcing their own plans in due course.
Stamp duty changes
The stamp duty system in England and Northern Ireland has been simplified somewhat with no tax payable on the first £500,000. It is worth noting that those with second homes and buy to let investors will benefit from the zero tax range but will still pay the additional 3% extra duty on the entire property price.
Prior to the today’s changes there was a sliding scale of charges for England and Northern Ireland dependent upon the property sale price. The scale was as follows: –
• 0% up to £125,000
• 2% between £125,001 and £250,000
• 5% between £250,001 and £925,000
• 10% between £925,001 and £1.5 million
• 12% on proceeds above £1.5 million
There was a slightly different system for first-time buyers with 0% tax up to £300,000 and 5% between £300,001 and £500,000.
How much will this cost the UK government?
It is estimated that traditional property stamp duty tax equates to around £12 billion a year or 2% of the Treasury’s total tax take. The nine-month property stamp duty revision will cost the UK government around £3.8 billion. However, prior to today’s announcement the UK was one of the most expensive regions in the developed world in which to acquire property. While investors will breathe a sigh of relief for the next nine months, it will be interesting to see future tax policies after the changes come to an end.
There is no doubt that not only will there be a financial benefit for those acquiring UK property but there will be a sentiment benefit for the sector as a whole. The UK property market has held up remarkably well considering the doom and gloom scenarios of just a few weeks ago. Those waiting for the expected “collapse” in light of Covid-19 have been forced to think again and today’s announcement will refocus investor minds. While the sudden rush after the lockdown was lifted is starting to fade a little, many who had expected to acquire properties in the autumn may need to revisit their plans.