The news from the 2010 budget that first-time buyers would not be charged stamp duty on homes up to the value of £250,000 for the next two years was greeted somewhat lukewarmly by industry bodies. They argue that the exemption should have applied to all homebuyers as it will be difficult to police. It is planned to fund this move by increasing stamp duty to 5% for those buying homes costing more than one million pounds.
Although estate agents and mortgage lenders have given a cautious welcome to the idea of helping first time buyers, the Council of Mortgage Lenders (CML) said that it would have been much simpler to exempt all properties under £250,000, rather than restricting the policy just to first-time buyers. Both the CML and the Chartered Institute of Taxation warned that it would be difficult to prove exactly who was a first time buyer and who wasn’t.
Commenting on the new policy, John Whiting, the Chartered Institute of Taxation tax policy director said: “The idea sounds good on the surface, but runs the risk of there being complex definitions of first-time buyer that cause anomalies and difficulties in practice.” The CML warned that it would be difficult to verify genuine first-time buyers, as opposed to people who had previously owned property.
Currently, properties over the value of £500,000 have a stamp duty fee of 4% payable. That decreases slightly to 3% for properties in the £250,000 to £500,000 bracket and stamp duty is payable at 1% for properties between £125,000 and £250,000.
In order to qualify for the new stamp duty holiday the buyer must adhere to the following rules:
The 5% policy for the top end of the market will be brought in from April 2011 (if Labour wins the next election). This has prompted fears from estate agents that this sector of the market will be ‘flooded’ whilst others believe that it will be little more than a ‘minor irritation’. Treasury documents show that, over the next three financial years, the stamp duty aid for first time buyers will cost £550m with the increase on more expensive properties bringing in £390m.