Chancellor Philip Hammond has announced a reduction in Stamp Duty Land tax (SDLT), which will see 95% of first time buyers benefit over the next five years. The cut is set to save first time buyers more than £3 billion and will take effect immediately.
Former Stamp Duty system
Under the old system, those planning to purchase their first home would have been charged on a gradient basis:
- The first £125,000 incurred no tax
- The amount between £125,000 to £250,000 incurred a 1% tax (a maximum of £2,500)
- Any amount over £250,000 would incur Stamp Duty of 5%
The new system – homes up to £300,000
Those buying a first home for less than £300,000 will now pay no Stamp Duty.
First time buyers purchasing a home at the average price of £207,693 (Source: Halifax) would have paid £826.93 in Stamp Duty under the old system. However, from today, they will pay nothing.
Homes up to £500,000
For a property which is worth between £300,000 and £500,000, the first £300,000 will incur no Stamp Duty, whilst the amount over £300,000 will be subject to 5% Stamp Duty.
This will benefit those people looking to buy their first home in a high value area, such as London, where they can expect to pay an average of £410,000. Under the old system, this would incur Stamp Duty of £10,500, whilst the new system cuts this to £5,500.
Predicted savings
According to Treasury documents released to support the Budget, first time buyers are set to save:
- £125 million in 2017/18
- £560 million in 2018/19
- £585 million in 2019/20
- £610 million in 2020/21
- £640 million in 2021/22
- £670 million in 2022/23
Signalling a £3.19 billion saving for potential homeowners over the next five years.
Overall, this change will mean that 95% of all first time buyers will see a reduction in Stamp Duty, with 80% paying no Stamp Duty at all.
For more information about how the Autumn 2017 Budget affects you, or to discuss your options as a first time buyer, feel free to get in touch.