The former Chancellor’s hat at the mini-Budget last month was full to the brim with what he was keen to present as rabbits, one of which was a set of major changes to the thresholds for Stamp Duty Land Tax (SDLT).
In short, the thresholds for first-time buyers have increased from £300,000 to £425,000 on property worth up to £625,000, while for everyone else, the threshold has doubled from £125,000 to £250,000.
What this means for you depends on whether you are a first-time buyer, a home-mover, or a second-home buyer or investor.
First-time buyers
The changes mean first-time buyers will now only pay SDLT on homes purchased for more than £625,000. Previously, the cap stood at £500,000.
At the same time, the threshold for first-time buyers to pay SDLT has increased from £300,000 to £425,000.
According to HM Treasury, that means a first-time buyer purchasing a home for £400,000 will now pay £5,000 in SDLT, rather than the £10,000 they would have been liable for under the previous regime.
Meanwhile, a first-time buyer purchasing a property for £600,000 will now pay £8,750 in SDLT rather than the previous £17,500.
Crucially, where homes are being purchased jointly, both parties must be first-time buyers to qualify for relief.
Home movers
Home movers do not benefit from the same levels of relief as first-time buyers but will see savings of up to £2,500.
A home mover buying a property valued at £200,000 will now pay no SDLT but would previously have paid £1,500.
Buying a property at £400,000 would see the SDLT charge fall from £10,000 to £7,500 – a saving of £2,500.
Buyers of properties worth £600,000 will benefit from the same saving with the SDLT charge falling from £20,000 to £17,500.
Second-home buyers, landlords and investors
Anyone who owns more than one property will continue to need to pay an additional three per cent on the total purchase price of the property, but they will still benefit from the changes to the SDLT thresholds.
But what about mortgages?
Clearly, there has been considerable debate about whether the former Chancellor pulled rabbits from his hat, or whether what came out was in fact more akin to a less adorable species of small mammal.
This debate over what the entire package of measures means has led to circumstances where many lenders have taken products off the market. At the same time, there is a strong expectation that the Bank of England’s Monetary Policy Committee will raise its Base Rate considerably at its next scheduled meeting in early November.
People who already have mortgage offers are unlikely to see them withdrawn, but those who have not yet secured a mortgage may see the SDLT savings wiped out by the significantly increased cost of borrowing.
Link: Stamp Duty Land Tax
