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Chancellor hikes Stamp Duty floor

Chancellor Alistair Darling has scrapped Stamp Duty for properties priced below £250,000.

As The Negotiator predicted on Twitter this morning, as part of his Budget Report, the chancellor has increased the lowest Stamp Duty threshold from £125,000 to £250,000 for first-time buyers.

The move follows the Stamp Duty holiday, allowing buyers of properties priced up to £175,000 to avoid the tax, last year.

Some 70% of properties currently listed for sale on Rightmove fall under the new lowest threshold, which compares to just 25% under its previous £125,000 level. The total price of properties on Rightmove between £125,000 and £250,000 totals £60.8bn, resulting in potential stamp duty savings for first-time buyers of around £608m on currently available homes.

Miles Shipside, commercial director of Rightmove, says: “This welcome initiative removes the majority of properties for sale from the clutches of a somewhat restrictive tax for the UK property market, giving a welcome boost to the important spring market.

“A massive 70% of properties for sale are now tax-free for first-time buyers. However sellers may feel they have to negotiate less with a buyer who is now a couple of thousand pounds better off, which could blunt the benefits of this stamp-duty holiday.”

The chancellor has also increased Stamp Duty from 4% to 5% for properties worth over £1m, though just 2% of properties are affected by this change.

Eric Walker, managing director of London-based Bushells, says: “Properties over £1m will attract an extra 1% in tax - so what? Let’s be honest, a £1.1m house will cost an extra £11,000. The buyer will either discount this off the price, or the vendor will have factored this in to the asking price and perhaps offer an allowance to mitigate the increase.

“When the thresholds of 1%, 3% and 4% were introduced, agents adapted as they always do. What is interesting is that if anything, it may push prices up so that properties are well beyond the £1m barrier.”

He adds: “If the Government wants to improve the housing market, its not the saving of a maximum of £2,500 that will make a difference, after all, this can be added to a mortgage for another £15 a month. What is key is the ability of first-time buyers to actually get a mortgage in the first place.”

 

 

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