Reports indicate Chancellor Rachel Reeves will not extend the current SDLT relief for first time buyers (FTBs), creating another ‘cliff-edge’ for conveyancers and property lawyers in March 2025 as transactions are pushed through ahead of the deadline.
The Labour government has suggested the upcoming budget, on 30th October, will need find the right balance of tax rises and savings to find some £40bn as part of plans to balance the books and invest in public services.
Stamp Duty relief for FTBs is one of the last remaining policies of the Liz Truss mini-budget in September 2022, exempting FTBs from paying stamp duty on properties up to £425,000. Properties between £425,001 and £625,00 are charged at 5% on the portion between those two values, and if the purchase price is over £625,000 there are no exemptions. Truss also increased the nil rate band from £125,000 to £250,000.
Subject to announcements in the budget, the rules could revert to the 2022 thresholds:
- SDLT is not applicable on property up to £125,000
- The next £125,000 (the portion from £125,001 to to £250,000) is charged at 2%
- The next £675,000 (the portion from £250,001 to £925,000) is charged at 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) is charged at 10%
- The remaining amount (the portion above £1.5 million) is charged at 12%
Whether the threshold for FTB relief will stay at £425,000 remains to be seen although in their manifesto, Labour indicated it would revert to £300,000 once the relief period finished. It is also rumoured the current 2% surcharge on foreign buyers will increase to 3%. According to research by Rightmove, 58% of FTBs are currently exempt from SDLT at the £425,000 threshold. If that were to drop to £300,000, 37% of homes would be eligible for the relief.
Conveyancers and property lawyers will be concerned that SDLT is once again being used a political football and will face yet another deadline which will undoubtedly see a spike in demand and pressure on firms to complete ahead of 31st March 2025. The run up to Christmas and into the New Year could very well be a busy one for the profession.
Tim Bannister, Rightmove’s Director of Property Science adds
“We’re likely to see a rush to complete property transactions before the stamp duty changes come into effect, as buyers look to avoid the additional costs, meaning a busier Christmas and New Year for the housing market. The average time it takes to complete a sale from the moment an offer is accepted is currently 152 days. Coincidentally, this is the same number of days between the Budget on 30th October 2024, and the proposed stamp duty deadline on 31st March 2025. This means that, on average, buyers that agree to a purchase after the Budget may not complete in time unless all involved in the transaction are working together to speed up the process.”
Rob Houghton, founder and CEO of reallymoving, said FTB market share has already fallen from 61% at the start of this year to 57% in September:
“The last thing First Time Buyers need coming down the road is yet another significant upfront cost, when they’re already grappling with extortionate house prices and higher mortgage rates. Reverting back to the old Stamp Duty thresholds seems completely non-sensical at a time when it’s harder than ever to get on the housing ladder and the Government should be doing everything it can to help First Time Buyers.”
Consumer group HomeOwner’s Alliance have called for the government to scrap SDLT altogether saying
“Over the last decade of campaigning there have been as many tweaks to the stamp duty land tax as there have been new housing ministers. This fruitless fiddling has done little to address the fundamental problem that stamp duty is a tax on homeownership that’s a major obstacle to the housing market functioning properly. It puts off families from moving up the property ladder, fleeces homeowners needing to make a sideways move and makes it more expensive for older generations to downsize. People moving also gives a welcome boost to the economy by buying white goods and furniture and refurbishing their new home”
Other items on the property sector wish list include more detail on the proposed Freedom to Buy scheme announced in the run up to the General Election, replacing the current Mortgage Guarantee Scheme which runs until 30 June 2025 following several extensions.
And help for buyers is very much on the agenda for John Phillips, CEO of Just Mortgages and Spicerhaart who urges the government to consider reintroducing some sort of Help to Buy scheme which helped over 350,000 people buy their own home since its launch in 2013. He points to the near £2 billion in revenue for the Treasury as evidence of its success and calls for an expansion of the scheme to include including second-hand and pre-owned properties to increase opportunities for potential first-time buyers.
“While some may question its legacy, there’s no doubting the success of Help to Buy in getting people onto the property ladder. Even with recent improvements in rates, there’s still a clear need for this scheme to return, especially in and around London where it is sorely missed, and for those unable to save for deposits due to ever higher rents.
“I urge the Chancellor to put forward a new version in the upcoming Budget, and one that includes pre-owned properties. Not only will this create real opportunities for first-time buyers, but their activity will help ignite the entire housing market and will support the wider economy too. Not only is Help to Buy recognised by the public, both lenders and developers like the scheme, are receptive to a return and can easily implement it again.
“While a scheme like Help to Buy may be at odds with the core values of a Labour government, we must recognise its success and the clear need for intervention. Housebuilding targets alone are simply not enough – especially as no government in recent memory has ever hit them. Increasing supply must work in tandem with tangible support to increase the routes to homeownership. If not a return to Help to Buy, then the government really needs to get behind the schemes actually helping people buy in today’s market, such as Shared Ownership.”
The budget is due on 30th October 2024.
One Response
There is at least one factory outfit now telling its clients that the average time for a transaction is thirty weeks. The massive irony being of course that the reason for the huge timeframe is their very existence in the chain! Simply appalling, so their clients instructing now are actually already too late to stand a chance with this deadline.
Presumably though the Estate Agent taking those referral fees to pass people on will have neglected to pass on that important piece of information?