Chancellor Kwasi Kwarteng announced a cut in stamp duties today, but homebuyers hoping for a major overhaul will be disappointed.
The threshold at which the stamp duty kicks in will be immediately and permanently doubled from £125,000 to £250,000, but the rates will not change meaning the maximum saving is £2,500.
For someone who buys an average home of $270,000, that means their bill will be reduced from $3,500 to $1,000.
New buyers will see their exemption level rise from £300,000 to £425,000 and pay no stamp duty up to that level.
| Band | Stamp tax land tax rate | Extra rate for landlords / second homes |
|---|---|---|
| £0 – £250k | 0% | 3% |
| £250,001 – £925k | 5% | 8% |
| £925.001 – £1.5m | 10% | 13% |
| £1.5 million + | 12% | 15% |
| * No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC | ||
| Band | Stamp tax land tax rate | Extra rate for landlords / second homes |
|---|---|---|
| £0 – £125k | 0% | 3% |
| £125,001 – £250k | 2% | 5% |
| £250,001 – £925k | 5% | 8% |
| £925.001 – £1.5m | 10% | 13% |
| £1.5 million + | 12% | 15% |
| * No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC | ||
The move into the so-called mini-Budget is a cut in one of Britain’s least favored taxes, which has a much greater impact on some buyers than others.
While first-time buyers get a stamp duty exemption and people who buy a home worth an average of £270,000 have to pay bills of around £3,500, people buying single-family homes in more expensive areas can get bills in the tens of thousands of pounds.
But the permanent stamp duty mini-budget of paying nothing up to £250,000 will save people far less than Rishi Sunak’s previous stamp duty holiday, which lifted the tax to £500,000.
Under the mini-Budget Stamp Duty Reduction, buyers will save up to £2,500, while under Sunak’s Stamp Duty Holiday they can save up to £15,000.
How much stamp duty would you pay now?
Average £270,000 house: £1,000 – Save £2,500
£350,000 house: £7,500 – Save £2,500
£450,000 house: £10,000 – Save £2,500
£500,000 house: £12,500 – Save £2,500
£750,000 house: £25,000 – Save £2,500
£1,000,000 house: £41,250 – Save £2,500
A permanent stamp duty reduction has been implemented in Kwasi Kwarteng’s mini-Budget but will save buyers up to £2,500
How stamp duty works
Stamp duty is levied on the purchase price of a home and is levied at various rates above the thresholds.
Initial buyers had a stamp duty exemption of up to £300,000, which has now been increased to £425,000.
Previously stamp duty started above a threshold of £125,000 at 2 per cent and then rose to 5 per cent above £250,000
Now the first £250,000 is tax free and amounts above that are charged at 5 per cent up to the 10 per cent threshold at £925,000.
The last major permanent stamp duty reform by George Osborne lowered bills lower on the price ladder for some homebuyers and removed cliff edges, but increased costs for those buying expensive homes.
Stamp duties will still remain significant for those buyers under the Kwasi Kwarteng discount, but they will see a £2500 reduction.
In April 2016, the stamp duty on sale-to-let and other additional properties was reformed, with the addition of a new 3 percent surcharge on all rates. This remains under the new higher threshold system.
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