The Tories’ emergency Stamp Duty cut will hand a massive tax break to landlords and people buying second homes, it’s been revealed.
Chancellor Rishi Sunak yesterday slashed the property sales tax by moving the threshold when it kicks in, from £125,000 to £500,000.
Mr Sunak said the £3.8bn temporary change, to March 31, 2021, will take almost nine in ten buyers out of the tax and stimulate the housing market.
It will save the average buyer £4,500, rising to a maximum of £15,000 for homes over £500,000.
But because the biggest benefit goes to people buying more expensive houses, experts warned wealthy London and the South East would see the most cash help.
And because it includes all residential property sales, buy-to-let landlords and people buying second homes will also benefit from the tax cut.
In fact, due to a quirk in the system, people expanding their property portfolio will get a bigger cash discount than first-time buyers.
Labour’s Shadow Chief Secretary to the Treasury Bridget Phillipson wrote for the Mirror: “It could have been directed at families looking to get on the housing ladder or up-size.
“But because what the chancellor announced was so broad, huge chunks of the money will go to landlords and second home owners in the south east and London.
“At a time of crisis, should this really be the focus?”
Lib Dem leadership candidate Layla Moran added: “The Chancellor has slashed taxes for landlords while failing to support renters.
“This adds insult to injury for the many people struggling to pay their rent each month and facing the threat of eviction in August.
“There should be a guarantee that any Stamp Duty saved on buy-to-let properties is passed on to tenants through reduced rent.”
The situation is down to the way the tax cut is calculated.
The new £500,000 threshold for the tax to kick in – up from £125,000 – applies to all residential property deals in England.
That means people who already own lots of homes will get the same cash discount as those moving up the ladder.
And they will get a bigger discount than first-time buyers, because first-time buyers already had a discount under the previous system. Under the new system, first-time and other buyers effectively get the same discount.
Buyers of second homes are hit with an additional Stamp Duty rate of 3% on the entire value of the property.
This will not change under the temporary rate – but the main element of Stamp Duty will, across the board.
So for example, the following groups would pay the following Stamp Duty bill on a £600,000 home:
- First-time buyer: £5,000, down from £15,000 (£10k discount).
- Moving up ladder: £5,000, down from £20,000 (£15k discount).
- Landlord: £23,000, down from £38,000. This is made up of 3% on the entire price (£18,000) plus £5,000. (£15k discount).
The Resolution Foundation warned the Stamp Duty cut would largely help people in “higher house price” parts of the UK.
The think tank said: “Someone buying the average home in the North East will see no gain, while a buyer of an average home in London will save over £14,000.
“The average first-time buyer already pays no stamp duty in all regions and nations except London, and therefore won’t benefit.”
Chancellor Rishi Sunak admitted his schemes were not perfect – but said he only had limited time to draw them up.
He told BBC Radio 4’s Today programme: “Throughout this crisis I’ve had decisions to make and whether to act in a broad way at scale and at speed or to act in a more targeted and nuanced way.
“In an ideal world, you’re absolutely right, you would minimise that dead weight and do everything in incredibly targeted fashion.
“The problem is the severity of what was happening to our economy, the scale of what was happening, and indeed the speed that it was happening at demanded a different response.”