Stamp duty calculator reveals how Budget changes affect first-time and second home buyers
A STAMP duty calculator has revealed how the Budget affects first-time and second home buyers.
A massive change to stamp duty was presented by Rachel Reeves in today’s Budget – and it will come into force tomorrow.
First-time buyers will be relieved to hear The Chancellor’s stamp duty rise won’t affect them.
However, the hike does impact landlords and people looking to buy a second home.
Stamp duty is one of the additional upfront taxes that purchasers can incur when buying a property.
In the Autumn Statement today, Ms Reeves revealed that second-home buyers will face a stamp duty rate rise of two percentage points – from 3% to 5% – starting from tomorrow (October 31).
HomeOwners Alliance have since updated their stamp duty calculator to reflect the rise.
A spokesperson said: “This move is seen as a way to prioritise those buying a home to live in – which we strongly support.
“We have updated our guide on Stamp Duty: Who pays it? When? And how much? and our stamp duty calculator to include the latest changes.”
It is hoped that by discouraging people to buy second homes, it will be easier for first-time buyers and home movers to access affordable proprieties.
Speaking in the Commons, Ms Reeves said: “In our manifesto, we committed to reforming stamp duty land tax to raise revenue while supporting those buying their first home.
“We are increasing the stamp-duty land tax surcharge for second-home, known as the “Higher Rate for Additional Dwellings”, by two percentage points, to 5%, which will come into effect from tomorrow.
“This will support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years.”
But the hike in stamp duty land tax surcharge won’t be welcomed by landlords and could affect buy-to-let residential properties.
Richard Donnell, head of research and insight at Zoopla, added: “The extra 2% cost on buying second homes and investment property will reduce demand from second home buyers and investors.
“Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes.
It comes as…
- A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer’s Allowance to give cash to 60,000 more carers
“This is resulting in a higher level of selling by second home owners. In areas with above average second homes we have seen four times more homes come to the market.”
Meanwhile Stevie Heafford from Tax Partner described it as a “bold move”.
He added: “This will have an impact on the property market particularly for individuals who are in the process of selling their first home after acquiring their new main residence.”
And, although first-time buyers were shielded from the stamp duty hike – they are still set to pay more from next year.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Land is transferred to you or property in exchange for payment, for example, you take on a mortgage or buy a share in a house
The rate you pay depends on the price and type of property and certain thresholds.
If you are a first-time buyer no stamp duty is due if the property is worth £425,000 or less.
You’ll also get a discount if the purchase price is £625,000 or less and will only pay 5% SDLT on the portion from £425,001 to £625,000.
Those who aren’t first-time buyers will pay different rates depending on the value of their new home:
- If it’s up to £250,000 – no stamp duty is paid
- For the next £675,000 (the portion from £250,001 to £925,000) – stamp duty is charged at 5%
- For the next £575,000 (the portion from £925,001 to £1.5million) – stamp duty is charged at 10%
- For the remaining amount (the portion above £1.5million) – stamp duty is charged at 12%
For example, if you are buying a home worth £300,000 you would pay stamp duty at a 5% rate on the £50,000 – £2,500.
You’ll usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one.
Currently, first-time buyers are exempt from paying stamp duty on properties priced up to £425,000.
If a property is more expensive they only pay tax at 5% on the portion above £425,000 and up to £625,000.
As a result, 80% of first-time buyers are not liable for any stamp duty, while only 14% are required to pay a reduced rate, according to property site Zoopla.
The lower limit for the first-time buyer stamp duty exemption was temporarily increased in 2022.
But now it scheduled to revert to £300,000 in April 2025.
Similarly, the threshold at which all other buyers begin to pay stamp duty was raised from £125,000 to £250,000.
This increase is also set to expire in April next year.
The HomeOwners Alliance said the move was “disappointing”, although it had been highlighted in Labour’s manifesto during the General Election.
“It’s disappointing that the budget made no mention of extending this relief to help first time buyers,” a spokesperson said.
“Therefore for those first time buyers currently in the process of buying will need to act fast to avoid paying more in stamp duty.
“If the stamp duty relief is cut, it will make it even harder for people to buy their first home.
“We will continue to call on government to scrap stamp duty altogether. Find out more in our Scrap stamp duty campaign.”
It’s a huge blow for all home buyers and means they have just months left to get a sale across the line before the thresholds at which stamp duty becomes payable fall.
As a result, buyers will need to pay stamp duty on 93% of properties for sale in England from April 2025.
Guy Gittins, chief executive of estate agents Foxtons, said: “Homebuyers will be understandably disappointed, but not surprised, about the lack of a stamp duty relief extension, with the current thresholds set to revert back as of March next year.
“However, as they have already factored this into their purchase plans we do not expect it to impact the strong demand we’re currently seeing in the market.”
BUDGET 2024
It comes as the winners and losers of the 2024 Budget were revealed – will you be better off?
Carers and workers were among the victorious today – while smokers and drinkers were some of the worst hit.
The Chancellor announced that she will not extend the freeze on income tax thresholds and confirmed a hike to the amount of national insurance that employers will pay, which could have a knock on effect to workers.
Meanwhile more than 3 million workers will receive a pay boost after Ms Reeves announced the National Living wage will rise from £11.44 to £12.21 from next April.
She also confirmed speculation the national insurance on employers’ pension contributions will increase.
Around 60,000 more carers will benefit from the Budget too, after the Chancellor made a key change to Carer’s Allowance this week.
Elsewhere, punters will pay less for a pint of beer after she slashed alcohol duty rates by 1.7%
But, although draught duty is being cut, the cost of wine and spirits will increase.
Home buyers were also rewarded in the Budget as the Government confirmed that it will deliver more affordable housing.
Labour followed through with its pledge not to increase income tax, National Insurance and VAT rates.
Rachel Reeves confirmed that the full new state pension will rise in April from £221.20 a week to £230.25 – providing pensioners with up to £473 extra a year.
Smokers have also been dealt a blow as the Chancellor confirmed that the price of a pack of cigarettes will rise from 6pm tonight.
Rachel Reeves took an axe to the “Right to Buy” discount, which was given to those who want to buy their council house.
The Government has also confirmed that the £2 bus fare cap for single journeys will rise to £3 until the end of 2025.
The Budget includes an increase in employers’ national insurance contributions by 1.2 percentage points, with Ms Reeves saying it is “the right choice to make”.
SUN MONEY ANALYSIS
IN a bitter blow for first-time buyers, the stamp duty threshold will fall back to £300,000 in April.
Assistant Consumer Editor Lana Clements explains what it means for prospective buyers.
It was hoped the Chancellor would make the current higher exemption of £425,000 permanent after it was raised in 2022, however, Rachel Reeves decided against the move.
Buyers now face a race against the clock if they want to avoid paying more when taking their first step on the property ladder.
A first-time buyer purchasing a £425,000 property today won’t pay any stamp duty but after April next will face a bill of £6,250.
The government estimates that an increase in second home stamp duty will support an extra 130,000 purchases by first-time buyers.
But this could be small comfort for buyers faced with having to save thousands of pounds extra to pay stamp duty