On 22 November 2017, UK Chancellor Philip Hammond presented his Autumn Budget to Parliament and the nation. This major exercise in excel spreadsheet wizardry spells out just what the government has planned for the country’s purse strings over the coming months.
It’s his second stab at the nation’s fiscal master plan, which covers everything from taxation to teaching and transportation. A very tricky book-balancing act indeed, as figures don’t just need to add up to stop the UK’s coffers from running dry; but changes also need to keep mutinous thoughts from the minds of its citizens.
Housing seems to make up the biggest of year’s Budget headlines. The Chancellor appears to be trying to address the big issues facing UK home buyers with some changes that, on the face it, look like very welcome news for home buyers and movers.
Here, moving gurus Smoove Move take a deeper look inside the red leather briefcase to see just how the Budget is likely to affect people on the move in the property market.
Stamp duty stamped down for first timers
The biggest hooray on Wednesday 22 was from first-time house hunters in England and Wales. They’d just heard Mr. Hammond tell them that he was going to abolish their stamp duty if the property they are buying is worth less than £300,000. This cut is designed to reverse the decline in home ownership amongst young people (the proportion of people aged 25-34 who own their own homes fell from 59% to 37% between 2004 and 2015) and help them buy their first home. Scotland may follow suit if the Scottish government gives it the thumbs up.
How does it work?
Stamp duty, a sliding scale tax on property purchase, has long been seen as yet another stumbling block for people trying to get a foot on the housing ladder. It means you would pay 2% on the purchase price of a property between £125,001 and £250,000 and 5% on any more up to £925,001, when the rate hits 10%. And even more if the property is buy to let or a second home. So, if you bought your first home a week ago for £250,000, you’d have paid the Government a big fat £2,500 for their trouble. This week, it’s free. We feel your pain if that’s the case.
For lucky old Londoners, most of whom who only dream of a first home under £300,000, Hammond’s helping hand stretches even further; the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty, with the remaining £200,000 incurring 5%.
An expensive move?
It’s thought that overall, around 95% of all first-time buyers will benefit, with 80% not paying any stamp duty on the purchase.
But this may not be the property panacea that it appears to be.
The Office for Budget Responsibility provides independent analysis of the public finances ahead of the budget. Their bean counters have been very busy indeed and reached some gloomy conclusions about the stamp duty changes. They predict existing homeowners would be the only people to benefit as they expect house prices to rise by 0.3% over the next year as a result of the change.
They also rather pessimistically predict that the incentive will only encourage an extra 3,500 purchases by first-time buyers.
If their sums are right, this adds up to a big cost in lost revenue (over £3.2 billion over the next five years) for each first-time buyer who decides to buy because of the scheme. In fact, some critics estimate that this could cost the Exchequer £900,000 for each one who signs up.
Who counts as a first time buyer?
To qualify for the stamp duty exemption, you’ll need to show that you’re a first-time buyer. That means you’ve never owned a bought or inherited property anywhere in world.
If you’re buying to let, forget it. Even if this is the first property you’ve bought. To avoid paying stamp duty, you need to be living in your home as a main residence.
More 2017 Budget changes designed to help movers…
- £44bn in overall government support has been promised for housing to meet target of building 300,000 new homes a year by the middle of the next decade
- Local councils can charge 100% rather than 50% council tax on empty properties to discourage homes standing empty.
- £400m has been put aside to regenerate local authority housing and £1.1bn to create new sites for development
- There will be a review into why housing developments granted planning consent take so long to build.
- Ways to encourage landlords to offer longer, more secure tenancies will be discussed.
- Borrowing caps for local authorities will be lifted in expensive areas to allow them to build more homes.
- There will be a consultation on how to increasing planning permission for schemes with a high number of homes for first-time buyers or affordable rent.