Millie Hurst | Contributing Writer | Tuesday, 17 October 2017

philip-hammond-plans-stamp-duty-cut-in-london

Stamp Duty For First Time Buyers Could Soon Be Cut

The Debrief: It's a step in the right direction...

In next month’s budget, expected towards the end of November, there’s set to be a cut on stamp duty for first-time buyers in London. The plan is to reduce the tax levied on home-buyers to 1%.

For now, it’s unclear whether it’s only for London, or if it’ll apply to the UK as a whole, but the cut would save first-time buyers in London approximately £340m each year.

Quick history lesson: UK Stamp duty was first introduced in 1694, as a way to pay for the war with France. The temporary solution was so successful that it stayed in place and eventually became one of the UK's many forms of taxation.

Stamp duty used to involve physically stamping an official document to show that the tax had been paid, whereas now it happens electronically, and it's chargeable even if a property is bought from abroad. Stamp duty is charged on all homes over £125,00 – meaning that it hits hardest in London. Great news. 

Ministers seem to have clocked on that a lot of people in their twenties and thirties, even those earning good money, feel as though they’re losing out on things taken for granted by the last generation – you know, things having the vague possibility of buying a house.

Tory former minister David Willetts told BBC Radio 4’s Today programme: ‘If you are 30 now you are probably earning less than someone who was aged 30 10 years ago. Anything that rebalances and helps young people, I’d be in favour of.’ 

So in response to the general sentiment among young people that they're missing out, and in hopes of restoring our hopes in the system, the chancellor, Philip Hammond, has said that tackling inter-generational unfairness will be a key consideration of next month’s budget.

It's fair to say that stamp duty represents a hefty cost for anyone scrambling to get onto the property ladder - the Land Registry says that stamp duty means a £11,437 tax bill for the average first-time buyers in London, who pay a whopping £428,546 for their first home. (We might as well just come to terms with the fact we're never going to own a house now...)

The chancellor has been reportedly looking into making a ‘big cut’ to the tax levied on home-buyers - but is it really? When the property is so expensive in the first place, a 1% tax still equates to several thousand pounds.

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There’s also pressure being put on Transport for London to release unused land for homes to be built on, due to the risk that a cut in stamp duty could end up pushing up prices if there isn’t an increase in the number of new homes.

It's good news for young people trying to buy a property. But, given that far more young people are renting as buying's out of the question (the number of first-time buyers in London has decreased by 12% since 2014), a real, tangible improvement in the housing market for young people would make renting more affordable

Sure, the cut to 1% is a step in the right direction, but it's only really going to help people who can put a deposit together. And it’s totally absurd that people going through Help to Buy schemes are still paying stamp duty, effectively paying the government twice to buy a property. We won't be getting our hopes up about getting a London home anytime soon...

Like this? You might also be interested in:

London House Prices Have Dropped, What Does It Mean For You?

Meet The Young Women Beating The Housing Crisis By Living In A Van

10 Things You Need To Know When Buying A House In The UK With A Partner

Follow Millie on Twitter: @milliehurst_

Tags: Politics, Housing Woes