Two-year holiday for first-time buyers
26th March 2010 by: Andrew Jacobs
First-time buyers have been handed a break from stamp duty as the government lends a helping hand up the treacherous first steps of the property ladder.
The Chancellor has scrapped stamp duty on homes worth up to £250,000 for first-time buyers over the next two years, making homeownership a real possibility for 90%, saving up to £2,500 on initial properties, as well as doubling the current threshold from £125,000.
"The housing market has now stabilised and has begun a slow recovery. But many first-time buyers, particularly those without large deposits, still find it hard to get a mortgage,” Chancellor Alistair Darling announced as part of his pre-election budget.
"I want to help them, but in a way that is properly funded."
The Council of Mortgage Lenders (CML) predicted that a rise in the threshold to £250,000 would result in a total of 350,000 households benefiting at a cost of £630m to the government.
But, for the cushion to inflate around first time buyers, those at the higher end of the property scale will fund the stamp duty holiday through increased taxation. Homes purchases costing £1m or more will witness a 5% duty, up from the previous 4%, meaning buyers will hand over a £50,000 minimum in tax.
Currently, stamp duty is charged at 1% of the purchase price on properties costing between £125,000 and £250,000, although from today, first-time buyers are exempt from this band.
People buying a property between £250,000 and £500,000 have to pay 3% of the purchase price in stamp duty, while the tax is charged at 4% on homes costing more than £500,000.
“This new measure will be a much needed helping hand to first-time buyers and a boost to the burgeoning property recovery,” said Rosemary Rogers, Director of Reallymoving.com
Critics have suggested the Chancellor’s plans represent a “Robin Hood” tax and a return to Labour’s roots of taxing the rich to benefit the poor. Londoners in particular will be hit by the tax rise and the CML believes policing the change will prove difficult.
Under the CML’s own definition, first-time buyers typically included a high proportion of “returners” who had previously owned property but no longer did so. By HMRC’s rules, these first-time buyers would be exempt from the relief.
The definition also rules out companies, partnerships or trustees, meaning parents looking to set up a trust to own a property for their children would still undergo stamp duty.
"As always the devil is in the detail, and the detail is confused,” warned CML Director General, Michael Coogan. “The stamp duty concession in particular looks like a tax loophole waiting to happen.”
The Chancellor has scrapped stamp duty on homes worth up to £250,000 for first-time buyers over the next two years, making homeownership a real possibility for 90%, saving up to £2,500 on initial properties, as well as doubling the current threshold from £125,000.
"The housing market has now stabilised and has begun a slow recovery. But many first-time buyers, particularly those without large deposits, still find it hard to get a mortgage,” Chancellor Alistair Darling announced as part of his pre-election budget.
"I want to help them, but in a way that is properly funded."
The Council of Mortgage Lenders (CML) predicted that a rise in the threshold to £250,000 would result in a total of 350,000 households benefiting at a cost of £630m to the government.
But, for the cushion to inflate around first time buyers, those at the higher end of the property scale will fund the stamp duty holiday through increased taxation. Homes purchases costing £1m or more will witness a 5% duty, up from the previous 4%, meaning buyers will hand over a £50,000 minimum in tax.
Currently, stamp duty is charged at 1% of the purchase price on properties costing between £125,000 and £250,000, although from today, first-time buyers are exempt from this band.
People buying a property between £250,000 and £500,000 have to pay 3% of the purchase price in stamp duty, while the tax is charged at 4% on homes costing more than £500,000.
“This new measure will be a much needed helping hand to first-time buyers and a boost to the burgeoning property recovery,” said Rosemary Rogers, Director of Reallymoving.com
Critics have suggested the Chancellor’s plans represent a “Robin Hood” tax and a return to Labour’s roots of taxing the rich to benefit the poor. Londoners in particular will be hit by the tax rise and the CML believes policing the change will prove difficult.
Under the CML’s own definition, first-time buyers typically included a high proportion of “returners” who had previously owned property but no longer did so. By HMRC’s rules, these first-time buyers would be exempt from the relief.
The definition also rules out companies, partnerships or trustees, meaning parents looking to set up a trust to own a property for their children would still undergo stamp duty.
"As always the devil is in the detail, and the detail is confused,” warned CML Director General, Michael Coogan. “The stamp duty concession in particular looks like a tax loophole waiting to happen.”
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