Stamp duty tax on second homes to rise
Chancellor Rachel Reeves has revealed in the Budget that the stamp duty rate for individuals purchasing a second home will increase.
Stamp duty is a tax that must be paid when purchasing a property valued above a specific amount in England and Northern Ireland.
Individuals purchasing an extra property are currently facing an increased tax rate, which will increase from an additional 3% to 5% starting Thursday.
The Treasury stated that this initiative would provide a benefit to first-time home buyers and people wanting to relocate, putting them ahead of those purchasing second homes and landlords. As a result, it's expected that these groups will complete 130,000 more transactions in the coming five years.
It was reported that this rise would generate over £1.2 billion in taxes by the year 2029-30.
Analysts believe that the higher rate might discourage landlords from purchasing additional properties.
Paul Johnson, the head of the Institute for Fiscal Studies, indicated that renters would "shoulder some of the burden" from the rise in stamp duty for those purchasing second homes and for landlords, particularly as the availability of these properties decreases.
Ben Beadle, the CEO of the National Residential Landlords Association, expressed that the chancellor did not pay attention to the advice from the Institute for Fiscal Studies, which has indicated that raising taxes on the rental market will only result in increased rents.
"What renters really needed was a plan to increase the availability of new, quality rental homes. Instead, what we ended up with is a situation that leads to fewer options and rising rent prices."
Ben Twomey, the CEO of the advocacy group Generation Rent, commented, "Renters who have managed to save enough for a home deposit will benefit from the higher stamp duty surcharge."
Increased expenses for investors will create a more favorable environment for first-time buyers looking to enter the housing market.
At the same time, new home buyers will be affected by the government's choice to let the stamp duty relief for first-time purchasers expire.
In 2022, the Conservative government increased the stamp duty exemption limit for first-time homebuyers from £300,000 to £425,000. Additionally, they doubled the limit for other buyers, raising it from £125,000 to £250,000.
Starting next March, the thresholds will return to their previous lower levels.
Ben Thompson, the deputy CEO of the Mortgage Advice Bureau, expressed his disapproval of the decision.
"Many individuals might decide to stay in their current situation and keep renting, dealing with all the uncertainties that come with it," he stated.
As home prices continue to climb, an increasing number of buyers will find themselves facing a stamp duty charge, or they may have to pay even higher amounts.
The present rates for stamp duty are:
For properties valued between £0 and £250,000 (or up to £425,000 for first-time buyers), there is no tax to pay.
Starting Thursday, those purchasing a second home will incur an additional 5% charge.
In another part of the Budget, there was an announcement of a £500 million increase in funding for the Affordable Homes Programme. The government stated that this investment would help create as many as 5,000 new social and affordable housing units.
Reeves also stated that the government plans to lower the discounts on the Right to Buy scheme in an effort to boost the availability of council housing.
The Right to Buy program enables tenants living in council-owned properties to purchase their homes at a lower price.
The chancellor announced that local councils will be allowed to retain all of the funds generated from housing sales, enabling them to reinvest that money into creating new housing options.