Stamp duty cut: How much will you pay after the mini-Budget change?

A stamp duty cut was announced today by Chancellor Kwasi Kwarteng but home buyers hoping for a major overhaul will have been left disappointed. 

The threshold at which stamp duty kicks in will be immediately and permanently doubled from £125,000 to £250,000, but the rates will not change meaning the maximum saving is £2,500.

For someone buying a £270,000 average home this will mean that their bill is reduced from £3,500 to £1,000. 

First-time buyers will see their exemption level raised from £300,000 to £425,000 and pay no stamp duty up to that level – saving them a maximum £6,250.

STAMP DUTY RATES UNDER THE NEW SYSTEM
Band Stamp duty land tax rate  Additional rate for landlords / second homes
First-time buyers pay 0% to £425,000 then normal rates apply 
£0 – £250k 0% 3%
£250,001 – £925k 5% 8%
£925,001 – £1.5m 10% 13%
£1.5m + 12% 15%
* No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC 
STAMP DUTY RATES UNDER THE OLD SYSTEM
Band Stamp duty land tax rate  Additional rate for landlords / second homes 
First-time buyers pay 0% to £300,000 then normal rates apply 
£0 – £125k 0% 3%
£125,001 – £250k 2% 5%
£250,001 – £925k 5% 8%
£925,001 – £1.5m 10% 13%
£1.5m + 12% 15%
* No stamp duty is paid on property transactions costing less than £40,000 as these are considered low value and not reported to HMRC 

The move in the so-called mini-Budget is a cut to one of Britain’s least favourite taxes that has a far greater impact on some buyers than others.

While first-time buyers get a stamp duty exemption and those buying an average UK £270,000 home face bills of about £3,500, people buying family homes in more expensive areas can face bills of tens of thousands of pounds.

But the mini-Budget permanent cut to stamp duty so nothing is paid up to £250,000 will save people far less than Rishi Sunak’s previous stamp duty holiday, which removed the tax up to £500,000.

Under the mini-Budget stamp duty cut buyers will save a maximum of £2,500, whereas under Sunak’s stamp duty holiday they could save a maximum of £15,000. 

How much stamp duty would you pay now?

Average £270,000 home: £1,000 – saving £2,500

£350,000 home: £5,000 – saving £2,500

£450,000 home: £10,000 – saving £2,500

£500,000 home: £12,500 – saving £2,500

£750,000 home: £25,000 – saving £2,500

£1,000,000 home: £41,250 – saving £2,500

A permanent cut to stamp duty has been made in Kwasi Kwarteng's mini-Budget but it will only save buyers a maximum of £2,500

A permanent cut to stamp duty has been made in Kwasi Kwarteng’s mini-Budget but it will only save buyers a maximum of £2,500

How stamp duty works

Stamp duty is charged on the purchase price of a home and levelled at different rates above thresholds.

First-time buyers had a stamp duty exemption up to £300,000, which has now been raised to £425,000.

Previously, stamp duty kicked in above a threshold of £125,000 at 2 per cent and then stepped up to 5 per cent above £250,000

Now the first £250,000 is tax-free and amounts above that are charged at 5 per cent until the 10 per cent threshold at £925,000. 

The last major permanent stamp duty reform by George Osborne saw bills eased for some home buyers further down the price ladder and cliff edges removed, but higher charges for those buying expensive homes.

Stamp duty bills still remain substantial for those buyers under Kwasi Kwarteng’s cut, but they will see a reduction of £2,500.

In April 2016, stamp duty on buy-to-let and other additional properties was reformed, with the addition of a new 3 per cent surcharge on all rates. This will remain under the new higher threshold system.

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, or are a buy-to-let landlord, it’s important to get good independent mortgage advice from a broker who can help you find the best deal. 

To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.

Our mortgage calculator powered by L&C can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. You can also start an application online in your own time and save it as you go along.

> Compare the best mortgage deals available now

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source: dailymail.co.uk