Tapered Tax Break for Buyers in Budget
The tax break for those buying property continues for another three months, Chancellor Rishi Sunak confirmed in his budget today.
As we predicted last week in this column, thousands of people who were mid-transaction will benefit from the extension of the Chancellor’s popular Stamp Duty Holiday scheme until June 30. It was originally due to end on March 31.
A ‘slow down’ rather than a halt
After June buyers will continue to save on property up to £250,000 until October when the threshold will go back to £125,000.
But the extension of the current threshold of £500,000 means buyers in England and Northern Ireland will continue to benefit from up to £15,000 savings. Those in Wales and Scotland will benefit from paying no tax on properties worth up to £250,000.
The gradual nature of the extension allays fears that the ‘cliff edge’ nature of the original ending of the scheme would result in a disaster for the market, leaving thousands of property transactions to fall through. Now property portal Rightmove are predicting another 300,000 property sales before the end of October.
Around 150,000 individuals – including many industry professionals – had signed an online petition urging the chancellor to think again about ending the scheme abruptly in March. Much of this has to do with a log jam where surveyors and solicitors have been unable to keep up with demand and transactions are taking longer than usual – up to 20 weeks, rather than 12.
Estate agents’ regulator Propertymark today put out a statement saying they were pleased with the chancellor’s move.
Policy Adviser Mary Hayward pointed out such a move would have meant members losing out on up to £4,000 per property sale.
House prices to benefit from continuation
The Stamp Duty Holiday extension will also have an effect on house prices, which are expected to increase in line with buyer demand. So far, the price of the average property has increased by as much as £20,000 as a result of the Stamp Duty Holiday.
But not everyone agrees with the beneficial effect of an extension. Auction house owner, Mark Peck, Director, Cheffins warned the property industry would need to “brace itself for further pandemonium throughout the summer months.”
He added: “Whilst the stamp duty holiday certainly allowed the property market to continue with full force throughout the coronavirus pandemic and ensure that property sales continued at a fast pace, it has created an unhealthy scenario with values increasing at unsustainable levels within a short space of time.”
New scheme to incentivise mortgage lenders
A new Help to Buy scheme means 95% mortgages will once again be back on the table. Only this time, it’s not just restricted to first-time buyers. Anyone will be able to make use of the scheme, including existing home owners. The scheme will be available for property worth up to £600,000 – although not for investors.
Some analysts though are worried that these high loan to value mortgages will only serve to inflate house prices – as evidenced in the past.
Portfolio landlords hit by corporation tax
Portfolio landlords operating as a limited company may be amongst those hardest hit from the budget. That’s because from April 2023, corporation tax will increase from 19% to 25%.
Small companies earning less than £50,000 profit will continue to pay the current rate of 19% but it will increase gradually over that sum. Only those earning more than £250,000 in profit will have to pay the full 25% tax.