Home Money Property taxes to rocket 74% in five years as Chancellor decides against Budget stamp duty cut

Property taxes to rocket 74% in five years as Chancellor decides against Budget stamp duty cut

by Elijah
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No help for removal companies - stamp duty was not reduced in today's budget and from next year those buying a house will pay even more as thresholds change

The amount removal companies pay in property tax will soar by £9.4bn over the next five years, after Chancellor Jeremy Hunt decided not to cut land stamp duty in the Spring Budget from today.

The Treasury is expected to collect £12.7bn in property tax for the 2023-24 financial year, according to Office for Budget Responsibility figures published alongside the Budget.

But for the 2028-29 financial year, that figure is forecast to rise by £9.4bn to £22.1bn, an increase of 74 per cent.

No help for removal companies - stamp duty was not reduced in today's budget and from next year those buying a house will pay even more as thresholds change

No help for removal companies – stamp duty was not reduced in today’s budget and from next year those buying a house will pay even more as thresholds change

The taxes included in that figure are stamp duty on land, taxes transferred to property transactions in Scotland and Wales and the annual tax on wraparound dwellings.

Hunt was said to have been considering a stamp duty cut in the Budget as a way to boost the housing market, which has been hit by higher mortgage rates.

Recent seasonally adjusted data from HMRC found that home sales and purchases fell 12 per cent in the 12 months to January 2023.

To mitigate this negative effect, the Treasury could have chosen to reduce the rate of stamp duty on land or eliminate the home purchase tax entirely.

While this would have reduced the tax charged on individual home purchases, it could have encouraged more people to move and therefore pay the tax, as well as increasing the VAT that new homeowners would pay for renovating their properties.

For homeowners, the current situation is that purchases under £250,000 do not attract stamp duty. It is then charged at a rate of 5 per cent on the next £675,000, for homes worth between £250,001 and £925,000.

After that it rises to 10 per cent, up to a maximum rate of 12 per cent on the portion of a home over £1.5m.

First-time buyers pay no stamp duty on properties under £425,000 and face a 5 per cent charge on homes between £425,001 and £625,000.

However, those thresholds will soon change, which will be partly responsible for the increase in Treasury stamp duty.

In April 2025, the nil rate band (the amount below which no stamp duty is due) is scheduled to drop back to £125,000.

For someone buying a £400,000 house, that’s the difference between paying £7,500 today or £13,750 a year from now.

Relief for first-time buyers will also be reduced at the same time, and they will start paying stamp duty on homes over £300,000 instead of £425,000.

According to Coventry Building Society, the average stamp duty bill in 2023 was £9,937.

Timothy Douglas, of estate agent membership body Propertymark, said: “The Chancellor has missed the opportunity to introduce stamp duty relief and wider reforms to help more people buy and sell their dream home, what’s next with a guaranteed boost for the economy”.

Richard Davies, of London-based estate agency Chestertons, added: “Stamp duty is a significant financial burden on buyers which has seriously restricted the freedom with which people can trade depending on their personal circumstances.”

‘The Chancellor’s decision not to extend SDLT relief to first-time buyers is disappointing news.

“While this could lead to more first-time buyers rushing to buy a property before the relief ends in 2025, it will eventually make it much harder for future first-time buyers to get on the property ladder.”

Not included: The Chancellor did not announce the rumored 99% mortgage plan in the Budget

Not included: The Chancellor did not announce the rumored 99% mortgage plan in the Budget

Not included: The Chancellor did not announce the rumored 99% mortgage plan in the Budget

No help for first-time buyers

The Chancellor also spoke out against two measures he was reportedly considering which would have helped first-time home buyers.

The first was a 99 per cent mortgage scheme, in which the Government would have offered banks financial guarantees to encourage them to grant mortgages with only 1 per cent of the capital.

The second was to make the rules of the popular Lifetime Isa savings account more generous for first-time buyers.

The account offers savers a 25 per cent government bonus on their savings worth up to £1,000 a year, but they must use the money towards their first home or retirement.

If they are buying a house, it must be worth less than £450,000 or they will lose the bonus when they withdraw the money.

This limit has remained the same since April 2017. If the Lifetime Isa limit had increased in line with property prices, it would be more than £560,000 today.

Jonathan Stinton, head of intermediary relations at Coventry Building Society, said: “This budget could have been an opportunity to introduce innovative new schemes to help buyers with affordability and saving for a deposit, but not even the bare minimum was done.” .

“Not only is it incredibly disappointing, it feels like a huge misstep by the Chancellor.

‘First-time buyers are the foundation on which the rest of the property market stands. Not giving them adequate help is not helping the rest of the market.”

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