Chris Brierley is a senior associate solicitor and head of residential property in Thames Valley at Charles Lucas & Marshall (part of Coffin Mew Solicitors)
On November 22, 2017, Phillip Hammond, Chancellor of the Exchequer, delivered his Autumn Budget, writes Chris Brierley. With it, he announced a First Time Buyers Relief against stamp duty.
This was heralded as great news for first-time buyers, but what does it mean and what effect will it actually have?
Stamp duty is a tax that is paid when you engage in a property transaction in the UK where the value is more than thresholds set by the Inland Revenue.
In simple terms, it is a tax paid when you buy a house – and it can be an expensive part of the transaction.
For example, if you were buying a house for £350,000 as your new main home, having sold your existing or last home, the tax you would pay is £7,500.
Prior to the budget, a first-time buyer would pay the same amount of tax.
However, the Budget has introduced a reduction, called a relief, for people buying a house for the first time, known as ‘First Time Buyers Relief’.
The relief applies where you, and anyone else you are buying with, are first-time buyers of a residential property (a house, a flat etc.); you are buying that property after November 22, 2017, and the property is worth less than £500,000.
The relief granted reduces the standard rate of tax so that you will now pay no tax on the value of a property up to £300,000 and five per cent on any remainder up to £500,000.
This means that a first-time buyer buying the same £350,000 house above would now only pay £2,500 in stamp duty, saving £5,000.
The question that then remains is what does this mean for the housing market and will this give a big boost to first-time buyers?
In simple terms, the answer is little and no, or at least not yet.
In January, there were a number of national media articles written that suggested the relief was a failure and a waste, as it was having no effect.
The issue here is one of time.
In truth, the relief will have some effect eventually, but it could be a year or more before we see any difference.
The reason for this is straightforward; a first-time buyer is a saver.
They are saving their house deposit and will need to save anywhere between £20,000 or even maybe £50,000 for a deposit plus costs to buy their first house, depending on where they are in the country.
Therefore, whilst the reduction in stamp duty is nice, and is welcome, it is only a small percentage of what they will be saving and so will only have a limited effect.
In summary, the First Time Buyer Relief is a nice gesture by the Chancellor and will be welcomed by first-time buyers.
However, it will not have any immediate impact on the market – any effect will be gradual and will take several months to be noticeable.
Chris Brierley is a senior associate solicitor and head of residential property in Thames Valley at Charles Lucas & Marshall (part of Coffin Mew Solicitors) and can be contacted on (01635) 917485 or by email to email@example.com