Image by Chatham House, used under licence (CC BY 2.0)
As of this week, Boris Johnson has stepped into Number 10 Downing Street as both the Prime Minister and the head of the Conservative party. While his focus will be undeniably on Brexit, there are many other policies and plans that could also come to fruition under his leadership.
One of those plans is the possibility of reform for current Stamp Duty arrangements. In this blog, we take a look at what the rumours are surrounding these plans and what they could mean for home buyers and sellers across the UK.
Since Brexit was announced, the housing marketing has been in a bit of a slump. With the uncertainty surrounding the UK’s departure from the European Union, the market has stagnated as the general public hesitates to buy and sell property.
It’s been suggested that changes to Stamp Duty could come about in the Autumn Budget in order to boost the economy and stimulate the housing market, potentially before a no-deal Brexit departure.
Also suggested was the possibility of freezing new regulations, meaning many of the recent housing reforms announced by James Brokenshire would be put on hold, as well as the prospect of increasing property tax rates to account for the changes in Stamp Duty.
All these suggestions were revealed by the leadership bid team responsible for Boris Johnson’s campaign for the position of Prime Minister.
Under the rule of Boris Johnson, Stamp Duty could be abolished on all homes worth less than £500,000, which would be a vast increase on the current £125,000 limit. Even first-time buyers, who saw a Stamp Duty change in 2018 that allowed them to buy property up to £300,000 without paying Stamp Duty, would benefit from this change.
The plan also includes reversing the Stamp Duty increases on more expensive homes, which were last raised from 7% to 12% by George Osborne. The Stamp Duty rate for houses worth over £1.5million would therefore return to 7%. We’ve not seen any official announcements for what will happen to the below bracket of £925,000 to £1.5m but would assume that will also decrease.
Finally, there is also the potential for Stamp Duty to be switched from the buyer to the seller, according to Boris Johnson’s reveal during his premiership bid. This is a step that would apparently save the exchequer £700million a year since it would eliminate the need to subsidise first-time buyer exemptions.
These changes to Stamp Duty are ostensibly being introduced to help buyers move up the property ladder, since they would only be paying Stamp Duty on the property they’re selling, not the (potentially more expensive) one that they are buying.
It would also make First Time Buyers’ Relief redundant since first time buyers wouldn’t need to pay Stamp Duty on any property when buying their first home because they’re not also selling a property.
However, for buyers looking to downsize from a larger to a smaller property, the Stamp Duty changes could have a negative impact. With the reversal of Stamp Duty charges, they would be paying a larger amount of Stamp Duty to move to a smaller, less-expensive property. With Brexit uncertainty already reducing the number of reasons larger property owners have to move or downsize, this could lead to an even larger reduction in the number of people downsizing and therefore a reduction of the number of larger properties being marketed.
While some commenters argue that “majority of downsizers have little or no mortgage to pay and generally have significant equity, meaning they are ‘better placed than others to pay a little extra’”, this change may cause an issue for those homeowners who have “limited equity in their property and might not have access to money to cover the cost of Stamp Duty”.
What do you think of the changes Boris Johnson is proposing? If you have an opinion on the Stamp Duty changes we’ve spoken about in our blog, feel free to comment on our Facebook or Twitter pages, and let us know what you think!
If you’re looking for expert advice and expertise when it comes to selling your home, look no further than ShineRocks. With over 25 years experience in the Purley and Croydon area, we’re well placed to offer guidance on these potential stamp duty changes, both before and after they come into effect.
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