A HUGE change to stamp duty has been revealed by Rachel Reeves in the Autumn Statement.
Stamp duty is one of the additional upfront costs that purchasers may incur when buying a property.
The maximum value of a property on which first-time buyers’ relief will also remain at £625,000[/caption]
Currently, first-time buyers are exempt from paying stamp duty on properties priced up to £425,000.
If a property is more expensive they only pay tax at 5% on the portion above £425,000 and up to £625,000.
As a result, 80% of first-time buyers are not liable for any stamp duty, while only 14% are required to pay a reduced rate, according to property site Zoopla.
The lower limit for first-time buyer stamp duty exemption was temporarily increased in 2022, but it was scheduled to revert to £300,000 in April of the coming year.
Similarly, the threshold at which all other buyers begin to pay stamp duty was raised from £125,000 to £250,000.
This increase was also set to expire in April next year.
However, Rachel Reeves confirmed in the Autumn Statement that the current thresholds will be made permanent and will not change in April 2025.
It’s a huge boost for all home buyers and means they’ll continue to benefit for longer.
Speaking in the Commons, Rachel Reeves said: “In our manifesto we committed to reforming stamp duty land tax to raise revenue while supporting those buying their first home.
“We are increasing the stamp-duty land tax surcharge for second-homes known as the “Higher Rate for Additional Dwellings” by two percentage points, to 5%, which will come into effect from tomorrow.
“This will support over 130,000 additional transactions from people buying their first home, or moving home over, the next five years.”
For example, it means that a first-time buyer purchasing a property at £4250,000 will continue to save £6,250 in stamp duty.
The maximum value of a property on which first-time buyers’ relief will also remain at £625,000.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Land is transferred to you or property in exchange for payment, for example, you take on a mortgage or buy a share in a house
The rate you pay depends on the price and type of property.
How much is stamp duty?
The amount of SDLT you have to pay depends on the price of the home you are buying and the type of property it is.
If you buy a property for less than £250,000 there’s no stamp duty to pay.
If you are a first-time buyer no stamp duty is due if the property is worth £425,000 or less.
You’ll also get a discount if the purchase price is £625,000 or less and will only pay 5% SDLT on the portion from £425,001 to £625,000.
Those who aren’t first-time buyers will pay different rates depending on the value of their new home:
- If it’s up to £250,000 – no stamp duty is paid
- For the next £675,000 (the portion from £250,001 to £925,000) – stamp duty is charged at 5%
- For the next £575,000 (the portion from £925,001 to £1.5million) – stamp duty is charged at 10%
- For the remaining amount (the portion above £1.5million) – stamp duty is charged at 12%
For example, if you are buying a home worth £300,000 you would pay stamp duty at a 5% rate on the £50,000 – £2,500.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
