On Thursday 17 November, the Chancellor, Jeremy Hunt, delivered his Autumn Statement to parliament. Included in the Statement was a deadline for the recent stamp duty tax cuts which were announced by his predecessor, Kwasi Kwarteng, in the September ‘mini’ Budget.
We consider how arrangements for stamp duty have changed over the last few years and how the new deadline may affect prospective homebuyers and the housing market in general, particularly house prices.
What is stamp duty?
When you purchase a property in England or Northern Ireland, you need to pay Stamp Duty Land Tax (most commonly referred to simply as stamp duty). In Scotland there is a similar tax for homebuyers which is called Land and Buildings Transaction Tax and in Wales this is referred to as Land Transaction Tax.
What are the standard rates for stamp duty?
As of December 2014, when George Osborne introduced progressive fees, the standard rates of stamp duty for residential properties have been as follows.
| Purchase price, lease premium or transfer value | Stamp Duty Land Tax rate |
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Since April 2016, an additional 3% has applied on top of these residential rates if buying a new residential property means that you will own more than one property.
There is also an additional 2% payment due for residential properties in England and Northern Ireland bought by non-UK residents on or after 1 April 2021.
Changes to the standard rates of stamp duty
From 8 July 2020 to 30 September 2021, the then chancellor (and now Prime Minister), Rishi Sunak, introduced a temporary tax break on stamp duty for residential properties to bolster the UK housing market after the first covid-19 lockdown period.
From 8 July 2020 – 30 June 2021, anyone buying a house priced at £500,000 or less was exempt from stamp duty tax and those purchasing a property priced above £500,000 were only taxed on the amount over and above the £500,000. From 1 July – 30 September 2021, the residential nil-rate tax threshold dropped to £250,000, before returning to the standard rate of £125,000 on 1 October 2022 (£300,000 for first time buyers). Buyers purchasing an additional home during this time still had to pay the additional 3% rate as usual and the extra 2% fee for non-UK residents also still applied.
On 23 September 2022, then chancellor Kwasi Kwarteng announced a further stamp duty incentive for homebuyers by raising the amount that a homebuyer can pay for residential property before they become liable for stamp duty from £125,000 to £250,000. The nil-rate threshold for first time buyers also increased from £300,000 to £425,000 and the maximum amount that a first-time buyer can pay whilst still being eligible for first time buyer’s relief also increased to £625,000.
No end date was provided for this incentive in September 2023. However, in his Autumn Statement, Jeremy Hunt announced that whilst these stamp duty cuts will remain in place, there will be a deadline for the new nil-rate for both existing and first-time buyers of 31 March 2025.
What does this deadline mean for the housing market and house prices?
Whilst Jeremy Hunt has now set an expiration date for the current stamp duty savings which may galvanise some would-be homebuyers, it is unlikely that we will see the same rush of buyers coming forward as we did in 2020 and 2021, which stoked demand and pushed house prices up significantly in a very short space of time.
With the first stamp duty cut of 2020, homebuyers originally only had 8 months (until 31 March 2021) to complete their house purchase, which set the clock well and truly ticking. Particularly for buyers who also needed to sell their own property at the same time, since it takes an average of 6 months to do so. Whilst this initial tax cut deadline was eventually extended, the extension for the £500,000 nil-rate was only for three months, and again, the nil-rate of £250,000 was only on offer for a further three months to 31 September 2021, meaning buyers had to act quickly.
In contrast, buyers now have a two year deadline to consider whether they want to move house, and with the average UK house price currently sitting at £295,000, there are not the same savings available as there were the first time around.
When you add in the fact that we are no longer privy to the same favourable interest rates and mortgage packages available in 2020 and 2021 and we are entering a recession with soaring costs of living, buyers will certainly need to be more circumspect.
Buyers are also aware of a looming fall in house prices, with predictions of a 10% drop in 2023, as affordability pressures really hit home.
So, whilst we may see slightly more urgency as we hit the summer of 2024 and the deadline for the stamp duty cut begins to loom, the bigger deciding factors for current and prospective homeowners weighing up the pros and cons of a house move in the next 12 months are likely to centre around mortgage rates and property prices.
If you do have plans to move home in the near future, you can use a stamp duty calculator to work out how much you would need to pay so that you can factor this into your moving costs.
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