January 3, 2018

Stamp Duty Changes for First-Time Buyers: What Do They Mean?

Chancellor Phillip Hammond announced the Autumn Budget on 22 November 2017, and one of the most talked-about changes was a cut in stamp duty for first-time buyers. But what do the stamp duty changes mean?

Stamp duty changes – the facts


As part of a range of measures designed to boost home-building, Hammond abolished stamp duty for first-time buyers on all properties up to £300,000 with immediate effect.


For properties costing between £300,000 and £500,000, first-time buyers will pay no stamp duty on the first £300,000, but will pay the standard 5% on the remaining amount.


For homes costing more than £500,000, first-time buyers will pay stamp duty at the standard rate.


The changes apply in England and Northern Ireland, and in Wales until the end of March, but not in Scotland.


How will the stamp duty changes affect buyers?


The Treasury estimates the changes will mean that 95% of first-time buyers will see their stamp duty cut, while 80% will pay none at all.


The maximum amount first-time buyers can save under the new system, compared with standard rates, is £5,000. Those making this saving will be buying a property between £300,000 and £500,000.


According to MoneySavingExpert.com, the average first-time buyer purchasing a property for £210,000 will save £1,640.


In an analysis of the stamp duty changes, the Office for Budget Responsibility (OBR) pointed out that first-time buyers with small deposits and limited incomes are likely to benefit from the new system.


The new rules will give these buyers some extra upfront cash to pad their deposit and bring down the size of their mortgage, which may put them above the income threshold for properties they otherwise wouldn’t have been able to afford.


The effect of the stamp duty changes in London


First-time buyers in London will benefit significantly from the stamp duty changes.


In his announcement, Hammond singled out the capital as particularly challenging for first-time buyers due to rapidly rising property prices.


London is the only market where the average first-time buyer spends more than £300,000, meaning that first-time buyers in the capital are likely to make the biggest savings under the new system. This will free up more cash to put towards a deposit.


How will the stamp duty changes affect house prices?


In its analysis, the OBR predicted that the new rules would push up house prices by 0.3%, based on market movements after previous ‘stamp duty holidays’. This is good news for those who already own property.


Even with these higher prices, the average first-time buyer is still likely to make a saving. The table below shows that the median first-time buyer in England would save £977:



Pre-stamp duty changes Post-stamp duty changes

(if prices rise by 0.3%)

Median house price for first-time buyers (England) £177,976 £178,510
Median first-time buyer deposit £28,479 £28,561
Stamp duty payable £1,059 £0


The effect would be even more pronounced in London, with the median first-time buyer saving £4,675:



Pre-stamp duty changes Post-stamp duty changes

(if prices rise by 0.3%)

Median house price for first-time buyers (London) £366,666 £367,766
Median first-time buyer deposit £91,666 £91,941
Stamp duty payable £8,333 £3,383


Stamp duty changes for first-time buyers: in summary


The new system will see stamp duty cut for the majority of first-time buyers, with people in London and those with small deposits benefitting the most.


If you’d like to know more about the changes, or any other aspect of the house-buying process, get in touch with us today – our team of experts is always happy to help.


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