The stamp duty was adjusted to make it easier for first-time purchasers to get a foot on the housing ladder. The reduction in the amount of stamp duty that must be paid on properties with a value of up to two hundred and fifty thousand pounds was announced by the Chancellor, Kwasi Kwarteng. This is a big increase from the previous amount, which was £125,000, and it applies not only to people who are buying a home for the first time but also to people who already own a home. According to Rightmove data, this means that 33% of all homes currently for sale in London are exempt from paying any stamp duty.
What is Stamp Duty?
When a person purchases a home, the buyer is responsible for paying a tax known as stamp duty. Few days back, buyers of homes or portions of homes valued at more than £125,000 did not need to pay any stamp duty. This figure is now set at £250,000 for all purchases and £425,000 for those who are making their first purchase.
For instance, the former rate of stamp duty on the acquisition of a home costing £425,000 was 5%, which meant that first-time buyers were required to pay an additional tax payment of £21,250 on their purchase. First-time purchasers will no longer be required to make any kind of tax payment whatsoever on a house purchase of the same value.
In addition, if you are a first-time buyer and you purchase a home with a value of £625,000 or less, you will not be required to pay stamp duty on the portion of the purchase price that is priced at less than £425,000. You will not have to pay 5% on the entire £625,000 because you will only have to pay 5% on the first £200,000; this will save you over £20,000 in taxes.
What kind of impact will the adjustments have on the real estate market?
After the COVID-19 epidemic, the government decided to take action to stimulate the housing market by instituting a stamp duty holiday in July 2020. The goal of the vacation was to stimulate the housing market, which had been in a stalemate since the pandemic. The first month saw an increase of about 16% in the number of house sales, which also led to an increase in the prices of available homes. In light of the latest modification to stamp duty, we posed this question to James Redington, who is in charge of both sales and lettings at our company: how would this affect the property market?
“The recent and, some would argue, long overdue adjustments to stamp duty will continue to assist the property management companies. It will encourage lots of purchasers wanting to climb onto the property ladder in what is still a competitive market in London, and it is particularly useful for first-time buyers, who can now take advantage of some big savings that are now available to them. It was good to hear that these changes would go into effect right away and stay in place, unlike the changes that had been made in the past, which were only available for a short time.
There will not be a significant increase in purchasing activity like there was in the previous year because the recent cuts to stamp duty are here to stay. However, the current moment is the best time to buy in terms of London’s real estate market. A property manager can advise the investor’s advantage to pay a mortgage on an investment property rather than pay rent on the same property. Get in touch with us as soon as possible if you’re interested in climbing the corporate ladder.