Budget 2010: Stamp duty axed below £250,000

CHANCELLOR Alistair Darling announced the axing of stamp duty on house sales under £250,000 for first-time buyers in this lunchtime’s Budget.

But the move will come at the expense of homeowners with property valued at £1m, who will have to pay increased stamp duty of 5%.

Mr Darling said he wanted to build on the previous stamp duty ‘holiday’, which ended last December, which he said had helped 260,000 homebuyers.

In today’s Budget, Mr Darling said he would double the stamp duty limit from £125,000 to £250,000 for first time buyers until the end of 2011.

The stamp duty cut will be funded through the introduction of a new higher stamp duty band of 5% on properties costing more than £1m from April next year.

The previous stamp duty extension was from £125,000 to £175,000. Stamp duty for those people with homes over £1m will increase by 1%.

He also extended the Support for Mortgage Interest Scheme for a further six months longer for those who have lost their jobs.

The scheme covers mortgage interest payments for those who have lost their jobs. It allows people who are on income support and jobseeker allowance to claim payments towards housing costs.

Mr Darling said the stamp duty move would help first-time buyers, who are still struggling to raise deposits to get on the housing ladder.

Daniel Hartland, tax partner at Grant Thornton, said: “The Chancellor has announced measures to help first time buyers to get a foot on the property ladder. 

“He has raised the threshold at which Stamp Duty Land Tax becomes payable on residential property from £125,000 to £250,000. The relief would be equivalent to a reduction in the average deposit for first-time buyers of £1,500.
 
“Whilst this is clearly a welcome measure and may act as a stimulus to the property market, we do have concerns as to how ‘first-time buyer’ will be interpreted. 

“For example, if a couple buys a property jointly and one is a first time buyer and one is not, as is not uncommon, is the relief to be available? HMRC’s press release would suggest not.  This may well limit the benefit of the provisions and should be addressed before the provisions are introduced.”

Lisa Shenton, head of conveyancing at law firm Irwin Mitchell, said: “The announcement will come as welcome news to the thousands of people who are struggling to find the money to purchase their first home.

“At the peak of the property market the number of first time buyers reached as much as 40% of all home buyers, but unfortunately the recession and the collapse of the housing market has now reduced this to around 20%.

“The lack of availability of affordable mortgages without significant deposits is also hampering the number of first time purchases, with the average deposit for first time buyers approximately £34,000 in the current market.

Given the size of the average deposit, if the banks make affordable mortgages more available to first time buyers, then this, alongside the raise in the stamp duty threshold, will certainly help to stimulate the housing market and contribute to the economic recovery.”

Simon Rubinsohn, RICS chief economist, said measures to help boost the housing market were welcome and moves to reshape stamp duty by shifting the burden from first time buyers at the lower end of the market towards those buying more expensive properties are a positive step.

RICS had called on the Chancellor to make the change and a recent survey of RICS members had suggested the number of transactions would increase even if a cut in stamp duty at the lower end of the house price range was offset against an increase on more expensive properties.

The change to stamp duty could help transactions rise above one million for the first time since 2007, although he said this was still well below the 1.7 million transactions that took place at the height of the market.

“However, stamp duty should have an impact on the market, although any improvement will be limited by the ongoing lack of housing supply and restricted mortgage lending,” said Mr Rubensohn.

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