Following today’s mini-budget from Chancellor Kwarteng and the plans to cut stamp duty (amongst a plethora of other tax cuts and incentives) Rachael Griffin, tax and financial planning expert at Quilter, sees it as a ‘gamble for the government’ and one which “may not pay off” as she comments:
“Every Chancellor wants to have his moment as a magician and pull a rabbit out of a hat at a budget. While today’s ‘fiscal statement’ is of course far from a budget, the cut to stamp duty represents just one of Kwarteng’s crowd-pleasing tricks.
“Many will be happy to hear that the threshold of how much a property has to cost before stamp duty is paid has been raised to £250,000. Similarly, first-time buyers currently pay no stamp duty on the first £300,000 and now that will be raised to £425,000.
“Finally, they will increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000. Kwarteng predicts that through this 200,000 more people will be taken out of paying stamp duty altogether.
“However, as stamp duty is a devolved tax those living in Wales and Scotland will need to wait and see if the cut is adopted by their governments too.
“Stamp duty is one of those taxes, like inheritance tax, that everyone loathes. Older generations in particular will stay in homes that are too big for their needs just to avoid paying this despised tax. Stamp duty has therefore been blamed for glueing up the housing system by disincentivising movers.
“We only need to look back a matter of months to see what a transformational impact stamp duty holiday has on the market. However, more demand also means higher prices unless more stock is built, which will spell bad news for many.
“But there are even schools of thought that suggest that when the number of property transactions increase, housebuilders spot the opportunity and capitalise by building more homes. This ultimately takes the onerous off the government to build more homes.
“More stock reduces or stabilises house prices and makes it easier for first time buyers to get on the property ladder. However, this takes time to feed through and in the short term it’s likely that we are going to see another surge in house prices putting the dream of home ownership further from reality for most of ‘generation rent’.
“This also all gambles on history repeating itself and while it often does we can’t be sure that against the backdrop of soaring inflation and eyewatering house prices this will actually materialise and the number of transactions will actually increase.
“Getting rid of stamp duty epitomises Truss’ trickle down economic plan to try and kickstart the economy into growth through lower personal taxes. Like some of the other plans revealed at the mini-budget today this represents a gamble for the government and one that may not pay off.”
Find out more about Quilter.