Stamp Duty Land Tax (SDLT) applies to both residential and commercial properties. The successive governments over the years have revised the system of SDLT many times, from adding bands to the increase in the applicable rates. Apart from this, these taxes are also influenced by inflation. These changes in the duty rates were primarily made to improve the functioning of the housing market, to boost the revenue, to steer the market, and/or to increase the progressiveness of the tax.
Stamp Duty has been recently abolished for first-time home buyers for properties up to £300,000 and it is said that this move will save £5000 for every four out of five first-time buyers. However, it is being said that there will be a rise in house prices in 2018 which could eat in to the saving.
SDLT in the United Kingdom is liable at the same time as deposit and abolishing of this tax for first-time home buyers means more purchasing power for them. However, the fact remains that the construction of new homes takes some time as compared to the rise in the demand. This means that when the demand exceeds the supply, the prices will adjust accordingly.
SDLT – Have the Changes Hit the Property Market?
The experts suggest that the stamp duty exemption in the autumn budget for the first-time home buyers may not cause an instant rush in the property market. However, in the long term it can have visible positive impact. Presently there is a slowdown in the U.K. housing market due to a multitude of factors. After the budget, the average price dropped by 1.2 percent for the buyers in the capital and even the national average of house prices has shown a downtrend from December ’17 to January’18. This is contrary to what was predicted.
However, there could be many factors affecting the demand for housing. There has been an uncertainty after the Brexit vote and the inflation has caused a pinch on the real incomes. Due to these reasons, people often don’t feel confident in committing to large mortgages, despite the incentive of stamp duty given by the government.
Stamp duty is a comparatively smaller amount when compared to a huge mortgage amount and cannot be the whole sole factor that will determine whether to buy a home or not. However, it is definitely a welcome step to improve the morale of the property market after a string of uncertainties.