The Impact of Stamp Duty Changes on the UK Housing Market
Stamp Duty (SDLT) has been cut in the UK, potentially saving homebuyers a significant amount of money when they purchase their residential property.
In these changes, first announced in Kwasi Kwarteng’s ‘mini budget’ in September 2022, properties below £250,000 are exempt from Stamp Duty and first-time buyers can benefit from additional Stamp Duty relief on properties up to £425,000 until March 2025.
This could help stimulate the housing market, encourage homebuyers to consider properties that would have previously been beyond their budget and help increase demand.
However, critics warn that these Stamp Duty Changes could have a knock-on effect, increase house prices, create ‘housing bubbles’ and push demand for properties even higher.
In this article, we’ll explain these changes in more detail, explore their impact on your purchasing or selling power and how we believe they could affect the housing market.
What is Stamp Duty?
If you’re purchasing a property or piece of land in the UK, you might have to pay a tax.
This tax is known as Stamp Duty in England and Northern Ireland, Land & Buildings Transaction Tax in Scotland, and Land Transaction Tax in Wales. (We will be referring to this tax as ‘Stamp Duty’ throughout this article.)
It’s based on the value of your property and applies whether you’re buying outright or with a mortgage, or on a freehold or leasehold basis.
In England and Northern Ireland, you have 14 days from the date of completion (when you exchange contracts) to pay stamp duty. In Scotland and Wales, you must pay within 30 days.
What is the change in Stamp Duty for England & Northern Ireland?
In September 2022, the UK government announced there would be changes to the amount of Stamp Duty that must be paid when buying a residential property. The threshold for Stamp Duty in England and Northern Ireland is now £250,000 whereas previously it was £125,000. This means you will be exempt from stamp duty if your property is worth less than £250,000, saving you a significant amount of money when buying a home.
These Stamp Duty changes came into effect on 8th February 2023 with the Stamp Duty Land Tax (Temporary Relief) Act 2023.
Here’s an easy-to-reference table to illustrate these changes.
| Stamp Duty Bands 2023 | Previous Stamp Duty Bands (pre-2023) | |
| Property value: £125,000- £250,000 | (now exempt) | 2% |
| Property value: £250,00 – £925,000 | 5% | 5% |
| Property value: £925,001 – £1.5 million | 10% | 10% |
| Property value: £1.5 million + | 12% | 12% |
First-time Buyer’s Stamp Duty Relief
Additionally, first-time buyers are now exempt from Stamp Duty for properties up to a value of £425,000 instead of the previous £300,000 in an attempt to help individuals get onto the property ladder more easily.
The threshold for the discounted Stamp Duty rate for first-time buyers has also increased from £500,000 to £625,000). Here’s another easy-to-reference table:
| First Time Buyers’ Stamp Duty Bands 2023 | |
| Property value: £0- £425,000 | (now exempt) |
| Property Value: £425,001 to £625,000 | 5% |
| Property Value: £625,000 + | (normal rates apply) |
How much Stamp Duty will you need to pay?
As you have seen above, there are different bands for Stamp Duty. The amount you have to pay depends on which band your property falls into. This can be complicated to calculate so let us give you an example.
You want to buy a house valued at £300,000.
- You will pay £0 Stamp Duty on the first £250,000 (because it is below the threshold)
- You will pay 5% on the portion from £250,001 to £350,000 = £5,000
Total Stamp Duty Land Tax (SDLT) = £5,000
Calculate how much Stamp Duty you may need to pay by using this handy Stamp Duty Calculator.
How will the changes affect homebuyers?
These changes to Stamp Duty are aimed at making home buying more affordable for all, especially more accessible for first-time buyers.
We’ve seen evidence that this works since 2017 when Stamp Duty for first-time buyers was abolished for properties below a certain value. When this happened, many realised they could buy their first home or considered properties that they wouldn’t have been able to afford before.
These Stamp Duty Changes also gave buyers more purchasing power, created a more active property market and increased competition for properties in lower stamp duty thresholds.
Property developers started to cater more to this demographic, building properties to suit this need. The same is likely to happen with these latest changes to Stamp Duty Land Tax (SDLT).
However, decreases in Stamp Duty can also increase demand for properties, especially for properties of a certain value and affect overall UK housing market activities.
How will the changes in Stamp Duty affect property sellers?
Stamp duty changes can also influence sellers in several ways. As previously mentioned, it can create a more active market and increase demand for properties falling within the lower stamp duty thresholds.
As a result, sellers can benefit from increased buyer interest and could sell their homes faster and for a higher price.
When do the Stamp Duty changes come into effect?
These recent Stamp Duty Land Tax (SDLT) changes for residential properties were announced in Kwasi Kwarteng’s mini budget on 23rd September 2022 and came into effect immediately.
However, these changes are only temporary and are set to end on 31st March 2025.
Summary
The 2022/2023 Stamp Duty changes are set to have a significant impact on homebuyers, sellers, and the UK housing market as a whole. With these cuts in place, buyers can make their budgets go further, sellers are likely to sell their property faster and first-time buyers should find it easier to get onto the property ladder.
However, as we’ve seen in recent years, these changes could actually place more pressure on the housing market, further increasing demand for properties priced in certain bands and pushing prices even higher.
