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First-time buyers handed £5,000 stamp duty tax break

The chancellor has used the Budget to scrap stamp duty for first-time buyers purchasing homes worth up to £300,000.

 
First-time buyers handed £5,000 stamp duty tax break
 

Stamp duty has been scrapped for the majority of first-time buyers as the government aims to extend the ‘home owning dream’ to young people struggling to get on the property ladder.

Chancellor Philip Hammond used his Budget speech to abolish stamp duty completely for first-time buyers purchasing property worth up to £300,000 and on the first £300,000 for those buying a home worth up to £500,000.

Hammond said he had received representations from a number of MPs about offering a helping hand to first-time buyers but noted that a stamp duty holiday would only help those ready to buy now and ‘offer nothing for the many who will need to save for years’.

‘With effect from today, for all first-time buyer purchases up to £300,000, I am abolishing stamp duty altogether,’ he said.

‘To ensure that this relief also helps first-time buyers in very high price areas like London, it will also be available on the first £300,000 of the purchase price of properties up to £500,000, meaning an effective reduction of £5,000.’

The measure will cut stamp duty for 95% of all first-time buyers who pay it and mean 80% of purchasers will pay no stamp duty at all.

Before today's change, properties worth up to £125,000 attracted no stamp duty; a 2% charge was due between £125,001 and £250,000; 5% between £250,001 and £925,000; 10% between £925,001; and those purchasing a property worth over £1.5 million paid 12% stamp duty.

Hammond said the measure would ‘revive the home-owning dream in Britain’ and would help those struggling to find the money for large deposits when paying high rents.

The measure is estimated to cost the government £125 million in 2017/18; rising to £560 million in 2019/20; then £585 million in 2019/20; £610 million in 2020/21; £640 million in 2021/22; and £670 million in 2022/23.

While first-time buyers will be pleased with the £5,000 saving, housing experts were less convinced by what they deemed ‘tinkering’ and called on the government to tackle the housing crisis.

Lea Karasavvas, managing director of mortgage adviser Prolific Mortgage Finance, said Hammond had kicked the issue of a lack of housing supply down the line.

‘The whole point of the housing crisis is that demand is too high relative to supply,' he said. 'Fiddling with the economic stop-cock by effectively handing out free money only exacerbates the problem and won’t help buyers, brokers, lenders or sellers in the long  run.’

Simon Heawood, chief executive of Bricklane.com, said the stamp duty cut was a ‘drop in the ocean given the affordability challenge of getting Generation Rent onto the property ladder’, with facing years of waiting before being able to own their own home.

He said the government should be looking at ways of helping young people save for a deposit, which is the biggest hurdle to homeownership.

Elizabeth Bradley, head of tax at Berwin Leighton Paisner, said the chancellor needed to go further in tackling issues created by stamp duty, often criticised for distorting the house price market.

She said the abolition of stamp duty for first-time buyers would be ‘a welcome move for thousands trying to get on the property ladder but it is far from the bold gesture needed to undo the damage that has been done by past reforms’.

‘The government has to acknowledge that there is a problem with the overly complex residential stamp duty land tax regime,’ she said. ‘It is time for real change to address this, not just tinkering.’

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