Page last updated at 16:44 GMT, Wednesday, 24 March 2010

Budget 2010: Stamp duty plans met with caution

Alistair Darling: "This means nine in 10 first time buyers will pay no stamp duty at all"

Estate agents and mortgage lenders have given a "cautious welcome" to plans in the Budget to help first-time buyers.

Stamp duty on sales up to £250,000 will be suspended for those buying their first property this year and next, Chancellor Alistair Darling said.

However, industry bodies argue this should have applied to all homebuyers as it could be difficult to police.

The change will be funded by a planned increase in stamp duty to 5% for properties costing more than £1m.

Currently, stamp duty for buyers of properties worth more than £500,000 is 4% of the purchase price. It is 1% for properties between £125,000 and £250,000. For properties between these brackets the stamp duty is 3%.

BUDGET 2010: STAMP DUTY PLANS
First-time buyers:
No stamp duty on purchases up to £250,000
Buyer (or all buyers if joint purchase) must not have previously owned a property anywhere in the world
Completion date must be on or after 25 March 2010 and before 25 March 2012
Property must be your only or main home

The Council of Mortgage Lenders (CML) argued that it would have been "clearly far simpler" to exempt all properties under £250,000, rather than restrict it to first-time buyers only.

Both the CML and the Chartered Institute of Taxation warned that defining and proving who is a first-time buyer could be difficult.

"The idea sounds good on the surface, but runs the risk of there being complex definitions of first-time buyer that cause anomalies and difficulties in practice," said John Whiting, the Institute's tax policy director.

The CML warned that it would be difficult to verify genuine first-time buyers, as opposed to people who had previously owned property but no longer did so.

Who qualifies?

The new rules state that in order to qualify for the stamp duty holiday:

• The purchaser - or all purchasers if buying jointly - must be buying their first home

• They cannot have previously owned another property anywhere in the world

• They must be buying somewhere that will be their only or their main home

• The completion date is on or after 25 March 2010 and 25 March 2012.

'Dampening' effect

The other change to stamp duty outlined in the Budget - the increase affecting the million-pound-plus properties - will come in from April next year, if Labour wins the forthcoming general election.

Estate agents said the move would "put a real dampener" on the sale of properties between £1m and £1.25m, if it comes in.

COMPLETE BUDGET DOCUMENTS


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"In the short term, the new rate is going to mean the market for properties worth between £1m and £1.25m will be flooded," said Stephen Ludlow, a director of Ludlow Thompson.

Knight Frank's Liam Bailey, said it would be little more than a "minor irritation" at the very top of the market.

But he added: "For houses worth around £1m, there will be pressure from buyers to pull back asking prices below the new threshold to avoid paying the extra stamp duty."

Over the next three financial years, the help for first-time buyers is expected to cost £550m, Treasury documents show.

The increase affecting more expensive properties is expected to bring in £390m over the same period. The Treasury said the two amounts would balance each other out over four years, however.

Conservative leader David Cameron accused Alistair Darling of stealing his party's policy on stamp duty.

"The only new ideas in British politics are coming from this side of the House," he told the Commons.

The Liberal Democrats welcomed the announcement on stamp duty but added: "It's quite astonishing the Budget was completely silent on the urgent need for more affordable homes for all."

This the second major change to stamp duty in recent years. In order to try to kick-start a recovery in the battered property market, the chancellor increased the stamp duty threshold from £125,000 to £175,000 in 2008.

Alistair Darling said the measure had helped 260,000 homebuyers before it ended in December last year.



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