Chancellor Kwasi Kwarteng unveiled a substantial range of tax cutting measures in announcements designed to boost future economic growth.
With the clear Intention to immediately boost house buying transactions, SDLT will now only be applied to purchases of £250,000 or more and for first time buyers the rate at which SDLT will be payable will now start at £425,000.
Increasing the SDLT tax-free thresholds for purchases of residential property will inevitably boost transaction levels in the residential property market. Kwarteng also stated that the proposed changes are to be permanent, unlike the previous ‘SDLT holiday’ announced by his predecessor Rishi Sunak.
The measures announced by the governement follow swiftly on from the Bank of England’s announcement on 22nd September that bank rate has been increased once again to 2.25%, up by 50 basis points. Savers will of course see this as a positive but anyone on a variable rate mortgage will likely soon see an increase in their borrowing costs as lenders adjust their rates.
Lobbying by the property sector in recent months has highlighted the dearth of rental property supply, which has resulted in sharp rises in rents in many regions across the UK. It was hoped that the government would look to reverse the 3% SDLT charge on additional homes, which, alongside the controversial Section 24 tax increases has caused many residential landlords to sell up in the last few years.
However this would seem to have been seen as a step too far for the government despite the obvious logic of encouraging new supply of rental property. And yet, as many properties are bought for prices below £250,000 and then rented out, the likelihood is that this reduction in the applicable SDLT rate could well encourage some landlords and investors to buy despite the additional 3% charge still being retained.
