The new chancellor, Kwasi Kwarteng, announced on Friday 23 September a series of measures to fight the rising inflation and the impact it is having on households.
One of the most debated measures is the increase of the Stamp Duty threshold from £125,000 to £250,000 and from £300,000 to £425,000 for First-Time Buyers, allowing more than 200,000 buyers to avoid paying Stamp Duty.
The measure takes effect immediately, meaning that buyers who are completing their home purchase today should be able to benefit from the tax relief.
Assuming that the pre-existing stamp duty bands remain unchanged, Kwarteng's announcement means that the cost of stamp duty on an average £312,000 house in England will fall from £5,600 to £3,100, a drop of 80 per cent.
The new rates are therefore as follows:
- 0%: £0 - £250,000 (£425,000 for first-time home buyers);
- 5%: £250,000 - £925,000;
- 10%: £925,000 - £1,500,000;
- 12%: £1,500,000+.
The UK finance minister added that the discounted Stamp Duty for first-time homebuyers will then apply to properties costing up to £625,000, as opposed to £500,000.
The deadline for payment of Stamp Duty Tax remains 14 days from the date of completion of the property purchase.
However, the measure has created a number of doubts among insiders; the Institute for Fiscal Studies claims that although Liz Truss and Kwasi Kwarteng are advocates of low taxation, their cuts would still leave taxation as a share of GDP at its highest level since the 1950s.
If the Office for Budget Responsibility (OBR) had been allowed to produce a new economic forecast today, it would have found that the government was on track to meet its fiscal targets, but the Institute for Fiscal Studies, which has a similar analytical remit to the OBR, looked at the data and found that the government could miss two key targets: reducing debt as a share of GDP by the third year of the forecast and balancing current accounts by the third year.
Kwarteng did not announce any changes to the remaining tax brackets. Assuming these rates remain unchanged, buyers would pay Stamp Duty at a rate of 5% on the value of a property above £250,000 up to £925,000, 10% on the value between £925,000 and £1.5m, and then a top rate of 12% above £1.5m.
In addition, the chancellor did not announce any changes to the surcharge on additional homes, which will remain at three percentage points, or to the surcharge on foreign buyers, which will remain at two percentage points.