21 Sep Liz Truss to cut stamp duty in hopes to boost growth plan
It is expected that Liz Truss will announce plans to cut stamp duty in the government’s mini-budget this Friday to aid economic growth. The new prime minister hopes that by cutting stamp duty, more people will be able to move homes and provide first-time buyers with a better chance to get on the property market.
Properties in the UK are now more unaffordable than ever, with figures released by the ONS showing that the average home sold in England cost the equivalent of 8.7 times the average annual disposable income – which is the worst affordability ratio in England since records began in 1999. For many Brits, getting onto the property ladder is now an unachievable dream. The industry has been suffering in the past few years with a severe undersupply of housing – which has pushed average house prices to a record £294,260 according to recent statistics from Halifax. The UK property market has been buoyant since last year – with house price growth showing an extraordinary 11.8% annual rise in 2021. This rise can be attributed, predominantly, to the stamp duty holiday. This was a tax break introduced in the UK during the peak of the coronavirus pandemic in July 2020, which scrapped the transfer tax on the first £500,000 of a home sale with savings of up to £15,000 available to buyers.
The holiday was gradually phased out and it reverted to the typical stamp duty system at the end of September 2021. However, demand for property within the UK has not faltered, with the average asking price of a house hitting a new high of £292,000, which represents a 15.5% rise, or £39,000 in the year to July according to the ONS’s latest house price index. Alongside this, 53% of properties are selling at or over their final advertised asking price and 98.9% are achieving their final advertised asking price according to Rightmove.
As a result of soaring UK house prices, more than 4 million homes have been pushed into a higher stamp duty bracket compared to March 2020. Of those pushed into a higher bracket, 28% have moved above the initial £125,000 stamp duty threshold according to data from Zoopla. A study from stamp duty experts Cornerstone Tax shows that 13% of Brits say that as a homeowner, they feel that they were forced to pay too much stamp duty in error and 61% of homebuyers said that they never considered if there was a mistake in the stamp duty they paid.
Truss indicated that she wanted to take steps to cut taxes, stating that ‘I’ve been very clear that as well as keeping taxes low, we need to put in place measures that are going to drive growth in the economy. And that’s my priority – we’ve had relatively low growth for several decades. We have to look at our tax rates.’ The plan to cut stamp duty is a bold move from the new prime minister and one which could aid first-time buyers in the UK property market.
David Hannah, Group Chairman of Cornerstone Tax provides some expert insight:
“We all know the challenges Liz Truss is facing in the UK property market. Inflation and rising interest rates are causing a whole raft of issues. We’ve seen a surge in building costs and building materials which is slowing down construction. At the same time, the affordability of mortgages has worsened and that’s going to impact first-time buyers, but also anybody on a variable rate mortgage. Finally, it will inevitably lead to a slowdown in construction which will exacerbate the under-supply of UK property. So, whilst prices might flatten and the rate of growth may slow, I don’t expect property prices to fall.
“By introducing a cut in stamp duty, which is a real cost to developers and home buyers, or even a stamp duty holiday for developers buying sites, it could aid in providing the UK property market with some much-needed stock and provide a lifeline for first-time buyers. There is a good chance this will alleviate the issue further, I believe the changes will be to get rid of the surcharges and move the zero rate up. However, stamp duty is no simple thing and requires years of expertise and education to understand its complexities. This is why it’s so often mis-calculated, our stamp duty support platform SDLT Compass can help navigate through the changes which Liz Truss is due to introduce into the UK property market.”
