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What do the stamp duty changes mean for first-time buyers?

On March 25, 2018

What do the stamp duty changes mean for first-time buyers?

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Last November, Chancellor Philip Hammond announced in the Autumn Budget that stamp duty would be abolished for first-time buyers of homes worth up to £300,000 – more than doubling the previous threshold of £125,000.

The changes, effective from 22 November 2017, apply to first-time buyers who:

  • have never owned a residential property in the UK or anywhere else in the world
  • are buying a residential property worth up to £300,000 in England, Wales* or Northern Ireland
  • intend to occupy the property as their main residence.

The Chancellor said that the changes would save 95% of first-time buyers money (and 80% would pay no stamp duty at all).

“This is our plan to deliver on the pledge we have made to the next generation that the dream of home ownership will become a reality in this country once again”, he said.

Impact of the stamp duty changes

In early January, Prime Minister Theresa May said that around 16,000 people have already benefited from the changes and over a million first-time buyers are expected to save money over the next five years.

But it’s important to remember that although the changes may help to reduce the upfront costs of buying a home, there’s still the issue of housing affordability to consider.

The government acknowledged in its impact assessment that the stamp duty changes were “expected to lead to a small increase in house prices in the year after implementation” – which the Office for Budget Responsibility (the government’s independent forecaster) warned could benefit existing homeowners more than first-time buyers.

Although first-time buyers will save money on upfront costs, it’s expected they’ll have to pay around 0.3% more for their property – which means an extra £636 on a property worth £212,079 (the average price of a typical first-time buyer home in the UK). Over the lifetime of a mortgage, though, this isn’t a significant amount.

The stamp duty changes will also benefit some first-time buyers more than others because of the regional differences in average house prices – as shown in the latest Halifax First-Time Buyer Review.

Region Average price for a typical FTB home Stamp duty payable before Budget StatementFTB stamp duty after Budget StatementSavings
Yorkshire and the Humber£140,122£302£0£302
North West£149,539£490£0£490
East Midlands£162,844£756£0£756
West Midlands£167,274£845£0£845
East Anglia£206,339£1,626£0£1,626
South West£205,485£1,609£0£1,609
South East£278,965£3,948£0£3,948
Greater London£421,216£11,060£6,060£5,000
Northern Ireland£120,205£0£0£0

Although the stamp duty changes are good news for first-time buyers, they may not make a significant difference to the overall affordability of buying a home. There’s still the deposit and various financial and legal fees to cover – which for some people means many years of saving before they can afford to get on the property ladder.

Help and advice for first-time buyers

If you’re a first-time buyer and need some advice about buying a property – even if you haven’t found one yet – please contact us and we’ll be happy to help.

* Until the end of March 2018, when Stamp Duty Land Tax (SDLT) will be devolved to Wales. Scotland already has an independent land tax system.

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  • By Peter Robinson  0 Comments