Chancellor of the Exchequer Jeremy Hunt has confirmed stamp duty cuts will remain in place until 31st March 2025 to support the housing market and those working within it, after which changes to nil-rate thresholds will be reversed.
Pledging to calm the economic “storm” engulfing the UK amidst soaring inflation – which sits at a 41-year-high of 11.1% – Hunt is aiming to raise around £54 billion over the next two years in order to plug the current hole in UK finances.
Other announcements made by Hunt include:
- The threshold at which the 45p tax rate is paid will be reduced from £150,000 to £125,140
- Annual exemption rate from Capital Gains Tax to be reduced from £12,300 to £6,000 next year, and £3,000 from April 2024
- Increase to public spending limited to 1% from 2025 – 2028, down from previous plans of 3.7%
- Income tax personal allowance and national insurance frozen until 2028
- Energy industry to receive expanded windfall tax from 25% to 35%
- Additional funding for adult social care of £2.8 billion next year and up to £4.7 billion the year after, providing 200,000 new care packages
- Tax-free dividend allowance reduced to £1,000 in 2023-24, then £500 in 2024-45
- A £13.6 billion package of business rates support
- Energy price guarantee to remain in place beyond April, though the cap will be raised from £2,500 to £3,000
- Inheritance tax to remain frozen until 2028
- An additional £3.3 billion in 2023-24 and again in 2024-25 will be allocated to the NHS
- Government’s review of state pension age to be published in early 2023
- Introduction of the Organisation for Economic Co-operation and Development’s “historic” global tax reforms to ensure multinational corporations pay the right tax in the countries they operate
- Energy price guarantee to remain in place, though at a higher level of £3,000. The most vulnerable will receive up to £900 to help offset this
- Triple-lock on pensions to remain
- Cap on increase in social rents to a maximum of 7% in 2024 – a £200 saving for the average tenant
- National Living Wage to rise to £10.42 per hour next year
Industry reaction
“The housing industry needed stability – and for once we got it with SDLT and FTB relief being left alone until March 2025,” said Lloyd Davies, Managing Director of Convey Law and Chairman of the Conveyancing Foundation, adding that he hopes Threadneedle Street leaves SDLT alone for some time.
Davies was, however, cautious of the destabilising impact further interest rate rises could have:
“We need the Bank of England to be sensible about interest rate rises now and hopefully we can see some stability coming back into the property market following the turmoil of the Truss regime.
It’s going to be a tough start to 2023 for our industry but I believe that interest rates will flatten out as increasing them causes house owner inflation as opposed to arresting it and has a significantly negative impact on the housing market and the overall growth of the economy.
I wouldn’t be surprised to see interest rates significantly reduce during the latter part of 2023 to try to get the economy growing again. In the interim, only the banks and the savers will prosper.”
“The budget may seem like a non-event where the housing market was concerned with stamp duty and planning remaining the same,” said John Phillips, national operations director of Just Mortgages. It was, however, “arguably just what was needed”, said Phillips:
“With the rest of the economy changing around us, the housing market will now benefit from stability rather than further changes.”
Richard Fearon, Chief Executive, Leeds Building Society, said the Autumn Statement has “delivered what the financial markets were expecting, which should provide continued confidence in the goverment’s fiscal plans”, adding:
“The lower money market rates that we have seen in recent weeks are already leading to reductions in mortgage rates and this trend is likely to continue, as long as this confidence is maintained.”
Adrian Anderson, Director of property finance specialists, Anderson Harris, commented:
“In today’s Autumn Statement, Chancellor Jeremy Hunt highlighted the importance of getting inflation and mortgage rates under control before announcing a raft of measures, both tax rises and spending cuts, in an attempt achieve that goal.
Whilst the medicine will be painful for many, for mortgage borrowers spiralling inflation combined with consequential higher interest rates is punishing and I am hopeful that these steps will result in the Bank of England base rate peaking around 4% as now predicted.”
Jeremy Raj, National Head of Residential Property at Irwin Mitchell said:
“It appears that once again the Chancellor of the day has been unable to resist tinkering with SDLT. However, there will be relief within the industry and for many buyers that all he has done is to stretch out the September ‘cuts’ until the end of March 2025, and there is nothing new or more complex to contend with. The industry will this time round be much more focused on how the markets react, and – ultimately – whether the cranking up of interest rates will continue apace. Frankly, given the ups and downs of recent times, many will question this Government’s ability to say what will be happening in March 2023, let alone in 2025, but there will be some sighs of relief from those currently mid-transaction that they will still be paying what they expected in SDLT.”
However, Rightmove’s property expert Tim Bannister pointed out that “the clock is now ticking on potential stamp duty savings”:
“[This] will bring a bit more urgency for people trying to get on the ladder or trade up in the next few years. As it’s still in place for a couple of years we don’t foresee a significant number of people bringing their plans forward to 2023, especially due to current affordability challenges, but we may see a jump in new sellers towards the end of next year and into 2024 to ensure they can move in time. The total time it takes to buy and sell a property is currently around six months, meaning people will need to be well on their way by late summer 2024.”
Bannister added this “[may also lead to] more people looking to friends and family for help with a deposit to be able to bring their plans forward before the current stamp duty savings disappear in 2025”, though he doesn’t expect the rush to replicate that seen during SDLT holidays of days gone by:
“The current savings are lower than the stamp duty holiday of 2020, so we don’t foresee the removal having a significantly dampening effect in 2025, with factors such as mortgage rates and house prices likely to have a much bigger impact on activity levels.”
Managing Director of House Buyer Bureau Chris Hodgkinson noted the impacts of the budget on buyers, but also landlords who may look to shift stock – something he says could lead to a “muted” housing market:
“A bleak budget for the nation, as the government ramps up taxes while we stare down the barrel of a 41 year high in inflation.
As a result, we can expect the Bank of England to act with a further hike to interest rates in the immediate future and this will put even greater strain on our household finances.
As it does, we can expect the property market to suffer as buyers can no longer afford to purchase at previous price thresholds, bringing house prices down in the process.
With changes to capital gains tax we can also expect an influx of stock from hard pressed landlords, who have grown weary of the government’s consistent attacks on their profit margins and are looking to off load their buy to let portfolios.
In doing so, this additional stock will also help balance the scale of supply and demand, contributing further to a muted housing market.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown added:
“Buyers will have been thrown into a quandary by the announcement on stamp duty. Right now, the market is sending out every possible signal that they might want to hang fire, because we could be reaching the peak. So it will make their decisions even harder now that Jeremy Hunt has warned them if they wait too long, they’ll end up paying more stamp duty.
This could end up providing a useful short-term boost to the market. By moving from an open-ended stamp duty cut to a limited opportunity, it could hurry through more sales, and help to keep the market ticking over until March 2025, when there’s a reasonable chance we will be out the other side of the recession.”
However, despite the short-term benefits to the market, the outcome for buyers is not necessarily improved, says Coles:
“However, this may not be the best outcome for buyers. The desire to save tax could force them to buy sooner than they otherwise would, and expose them to the risk of property price drops. Meanwhile, if they decide to hold on for the bottom, they could end up rushing for the end of the stamp duty break along with so many others that they end up paying over the odds.
Buyers already have incredibly tough decisions right now, and this announcement won’t have made it any easier.”
