Mini Budget 2022: Stamp Duty Tax Cut

In the government’s mini-budget announcement today, Chancellor Kwasi Kwarteng announced a permanent cut to Stamp Duty Land Tax (SDLT) - one of many tax reductions developed to stimulate economic growth.

This is the third time in two years that SDLT has been adjusted. The last two changes were presided over by former Chancellor, Rishi Sunak, who sought to deter the Pandemic’s potential hit on the housing market.

SDLT changes

• 2020 - SDLT Holiday beginning on the 8th June 2020 to 31st March 2021, with a temporary nil rate band until 30th June 2021
• 2021 - SDLT Holiday extended to 31st June 2021, with the nil rate band reducing to £250,000 from 1st July to 30th September, before returning to £125,000 on the 1st October
• 2022 - Permanent cut to Stamp Duty Land Tax (SDLT) announced in the September 2022 mini budget

Where the holiday wiped off SDLT bands for many homebuyers, this permanent tax cut is a reduction in the amount of tax you need to pay.

How much will I pay under new Stamp Duty rates?

Whether you're a homemover or a first time buyer, you can find out the new Stamp Duty rates below:

Existing homeowners

Existing homeowners no longer pay Stamp Duty on the first £250,000 of the value of their new property. This is up from the previous bracket of £125,000.

As with the previous SDLT rates, existing homeowners pay an extra 3% on additional property purchases on top of current rates.

First time buyers

If you’re a first time buyer, you no longer pay Stamp Duty on the first £425,000 of the value of your new home. This is up from the previous bracket of £300,000.

The value of properties on which first time buyers can claim relief has also been raised from £500,000 to £625,000.

What is Stamp Duty?

Stamp Duty Land Tax is a levy on the purchase of land and property in the United Kingdom. If your property exceeds a certain price, you are required to pay a percentage of the amount you exceed the tax bracket.

Historically, SDLT has been a big generator of revenue for the government, raising about £12 billion a year. Money generated via taxation can be used to fund reforms, projects and public services.

Why cut Stamp Duty?

Cuts and holidays are often used in times of economic downturn to stimulate growth. The Prime Minister, Liz Truss, is a proponent of trickle down economics - by taxing less, you encourage businesses to reinvest and stimulate growth, hoping that benefits trickle down to lower paid workers.

The Chancellor states that the tax cut will encourage first time buyers to make their first steps on the property ladder. Critics argue that the tax will instead punish first time buyers, pointing to the SDLT Holiday during the pandemic, where house prices shot through the roof.

Competition for housing is currently fierce. With a sheer lack of housing stock across the major UK cities, the number of buyers dwarfs the number of sellers. With first time buyers coming up against home movers with higher equity and financial flexibility, they may struggle to negotiate good deals on asking prices.

Summary: Welcome relief or higher prices?

Stamp Duty affects both residential and commercial buyers disproportionately. If house prices rise as they did in the 2020 SDLT holiday, first time buyers could be priced out of the market, whereas downsizers and commercial buyers would be less affected.

Perhaps if the government were serious about providing opportunities for first time buyers, they could restrict SDLT cuts to those who don’t already own existing properties or ongoing mortgages.

GetAgent guide to Stamp Duty

• Stamp Duty - Everything you need to know
• First time buyers pay 31% more due to Stamp Duty holiday
• Stamp Duty for non-UK residents