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Going, going, gone … ?Monday 18th December 2017
The Chancellor’s own rabbit moment at the Autumn Budget, this gesture was greeted as the one bright thing in an otherwise lacklustre, Brexit-restrained event. Announced with immediate effect the move means that first time buyers will not pay any stamp duty on homes costing up to £300,000, or the first £300,000 if the property costs up to £500,000 in high-value areas such as London. In the case of a higher priced property, Stamp Duty is at zero for the first £300,000 then payable at 5% on the difference between the purchase price and £300,000. For example, for a purchase price of £475,000, Stamp Duty is calculated as £0-£300,000 = £0, then £175,000 @ 5% = £8750. Prior to November 22nd, a property costing £475,000 would have attracted a Stamp Duty charge of £13,750.
Note though, properties costing more than £500,000 do not attract any of these benefits and you will pay Stamp Duty calculated using the existing bands, even if you are a first-time buyer.
At this point, it’s worth clarifying what constitutes a first-time buyer. The Law Society Gazette states: ‘A first-time buyer is defined as someone who has never owned a freehold or leasehold interest in a dwelling before and who is purchasing their only or main residence. Residential property anywhere in the world is counted when determining whether someone is a first-time buyer. All purchasers in a joint purchase must be first-time buyers to be eligible for the relief.’
Beleaguered millennials struggling to buy their first homes may have uttered a small cry of joy at this, after all, every little helps, but critics were quick to criticise saying that although it was a step in the right direction, the thing that scuppered most home-owning dreams was the lack of a deposit and that the policy would in fact help very few people. In fact, only around 3,500 people are expected to benefit from the move over the next couple of years. And the Office for Budget Responsibility (OBR) went so far as to say it is more likely to benefit existing homeowners as it’s likely to overheat the market and push house prices up.
But before we condemn the policy too harshly, note again what the Law Society Gazette observed on Budget day: ‘The Treasury says today’s changes mean that the Stamp Duty bill for the average first-time buyer in London will nearly halve, from £10,500 to £5,500. Nearly all first-time buyers who pay Stamp Duty will benefit, including almost 80% in London.’ So if a first-time buyer has been budgeting for the myriad costs involved in a house purchase, the Stamp Duty saving could be a welcome boost for their deposit.
Showpiece policies like this are always put under extreme scrutiny and will continue to be picked over but if you are in the position of being able to complete a house purchase deal because of it then it is indeed welcome news.
Please get in touch though if you would like clarification on the ways parents or other family members can help offspring or relatives get on the property ladder as we would be happy to discuss your options with you.
Our mortgage calculator has been adjusted to reflect the change in policy. You can see it here.