The UK government has implemented changes to stamp duty for second homes, effective from 31st October 2024.
- The revised surcharge rate on second homes is raised from 3% to 5%.
- Homebuyers will see increased costs, with the average stamp duty rising significantly.
- Expected impacts include a potential boost in transactions by first-time buyers.
- Concerns have been raised about the effects of this move on the rental market.
In a recent government announcement, the stamp duty surcharge for second homes is set to increase from 3% to 5%, effective 31st October 2024. This decision, unveiled by Chancellor Reeves, aims to adjust the financial implications for those acquiring additional properties. The change will affect buyers of second homes, buy-to-let properties, and firms purchasing residential properties.
The impact of this adjustment is considerable. For instance, using the average UK house price of £309,572, the stamp duty on a second home will increase from £12,265 to £18,457. Furthermore, when the temporary stamp duty threshold ends in April 2025, this figure will rise to £20,957. This move is designed to provide an edge to first-time homebuyers over those purchasing additional properties.
According to the government, an anticipated effect of this surcharge is an increase in the number of transactions by 130,000 over the next five years as first-time buyers and those purchasing a primary residence may find the market more accessible. However, there was no extension of the current stamp duty holiday for these buyers.
The existing stamp duty thresholds are also set to change. The temporary exemption threshold for first-time buyers, currently at £425,000, will revert to £300,000 from April 2025. Additionally, from the same date, existing homeowners will be liable for stamp duty on properties over £125,000, reduced from the previous £250,000 limit.
There are voices of concern regarding these changes, especially from the rental sector. Angharad Truman, President of ARLA Propertymark, expressed disappointment over the lack of support for landlords in the government’s budget. Truman emphasised the vital role of the private rented sector, which houses over 4.6 million homes in England, urging for incentives rather than penalties for landlords.
Emma Cox from Shawbrook echoed this sentiment, highlighting the significant role of landlords within the housing market. Despite landlords’ confidence and plans to expand their portfolios, she warned that disincentives such as the increased surcharge could deter investment, impacting housing supply. She stressed that a multifaceted approach would be required to meet national housing objectives.
The decision to raise the stamp duty surcharge highlights the government’s focus on supporting first-time buyers, despite concerns from the rental market.
