In the latest report detailing the tax cuts favored by Prime Minister Liz Truss, The Times reported that Kwasi Kwarteng, the chancellor, was preparing to push through sweeping stamp duty cuts as a “rabbit out of the hat” measure in his mini-budget. in the House of Commons on Friday. But economists and property experts said measures to further stimulate an already red-hot housing market would benefit wealthier people more and risk penalizing first-time buyers. It comes less than a year after former chancellor Rishi Sunak’s stamp duty cut during the Covid pandemic ended, which analysts say mainly benefited London and the south east and had little impact elsewhere in the UK. “It’s short-term cattle at its worst,” said Lewis Shaw, founder of Mansfield-based Shaw Financial Services. “This move will push house prices even higher, exacerbating inflation and further pricing first-time buyers out of home ownership. “If someone asked me how to drive an already overheated housing market into bubble danger territory and make things worse for everyone, this policy would be it.” Stamp duty is paid by buyers of land or property in England and Northern Ireland, with higher rates above certain thresholds. Separate land taxes apply in Scotland and Wales. Reports of a possible haircut sent shares in British housebuilders higher on the London Stock Exchange on Wednesday morning, with gains of between 3% and 6% for FTSE 100 companies Barratt, Persimmon, Taylor Wimpey and Berkeley – among the top performers on the London Stock Exchange. blue-chip index. Average UK house prices rose by 15.5% in the year to July, the highest annual rate of inflation since May 2003, according to official figures. Many economists regard stamp duty as a ‘bad tax’ because it discourages mobility as it is paid by home buyers rather than sellers. Several experts have called for sweeping changes in the way property is taxed, including changes to the municipal tax system. The stamp duty cut could help offset a possible slowdown in the housing market as the Bank of England raises interest rates, with borrowing costs expected to reach 4.5% next year, adding to financial pressure on home buyers . But analysts warned that without wider reforms, as well as efforts to boost housing supply, the measure would increase inflation while doing little to help those struggling to get on the housing ladder. “As borrowing becomes more expensive, the market already looked set to shift toward higher-income, wealthier borrowers and away from first-time buyers,” said Neal Hudson, real estate analyst. “Changes to stamp duty could accelerate this further reducing the cost of buying for investors [and] second home buyers’. Cutting the levy would also come at a heavy price as the government prepares to launch billions of pounds in tax cuts to business profits, national insurance and a freeze on energy prices. Across the UK, property transaction taxes generate more than £15 billion a year for the Exchequer. Archie Bland and Nimo Omer take you to the top stories and what they mean, free every weekday morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Truss has argued that boosting the economy is her primary goal, beyond the immediate impact of her policy measures on rich or poor. Measures to stimulate the housing market could boost wider economic activity by fueling demand for related goods and services such as estate agents, lawyers, removals, the building trades, furniture and white goods. But experts said starting a new tax break immediately after the Sunak stamp duty holiday would limit its impact. Alongside the rush to relocate for more space during the Covid pandemic, the stamp duty holiday saw a 43% increase in property transactions last year. A report by the Organization for Economic Co-operation and Development this summer found that UK property taxes were outdated and favored a wealthy elite. He warned that efforts to stimulate economic growth by reducing property transaction taxes were driving prices high. Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they will miss out. At the point where they think they can just wait for the next one, they will start to become less effective. “Even if it does stimulate demand, it overlooks the fact that the real drag on the property market is a severe lack of supply.”
