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Stamp duty axed on £250k homes
Written by on 30 March, 2010Alistair Darling has opted to axe stamp duty on homes worth up to £250,000 in a bid to aid first time buyers, whilst simultaneously introducing a higher rate of 5% on homes worth over £1m. This news comes at a time when first time buyers still need an average deposit of around £50,000 to get on the property ladder.
The Chancellor announced he was increasing the stamp duty threshold from £125,000 to £250,000 for first time buyers only, potentially saving them up to £2,500. To allow this to happen, the Chancellor will bring in a new 5% band above £1m, meaning a bill of up to £50,000 for some home owners.
Mr Darling has said the new stamp duty plans would be effective immediately and would be in place for at least the next two years, with the £1m threshold effective from the 2011/2012 tax year.
The Treasury have pointed out however, anyone who has ever owned a home in the UK before would be excluded from applying for the exemption. A spokesman for the Treasury confirmed first time buyers would have to re-affirm this was their first property at the time of purchase and checks would be carried out.
However, industry bodies have warned defining and proving who is a first time buyer could prove difficult. The Council of Mortgage Lenders (CML) has argued it would have perhaps been far simpler to exempt all properties under the £250,000 bracket rather than restrict it just to first time buyers. Had this stamp duty bid been in existence in 2009, around 69% of all home movers for the year would have skipped the duty and 92% of all first time buyers would have also avoided the fee.
The new rules have stated that in order to qualify for the stamp duty holiday:
- The purchaser(s) must be buying their first home
- They cannot have previously owned another property anywhere in the world
- They must be buying somewhere which will be there main and only home
- The completion date is on or after 25 March 2010 and 25 March 2012
Currently, stamp duty is positioned as 1% of the purchase price on properties worth between £125,000 and £250,000. Buyers who are not purchasing their first property will still pay this. Meanwhile, the £1m threshold for 5% tax will only apply to residential property.