The new Chancellor of the Exchequer Kwasi Kwarteng has announced his September 2022 budget in the house of commons today. The new budget has been designed specifically to fit Prime Minister Liz Truss’s attack on the rising cost of living and looming economic crisis that the UK faces. Below are some of the key points from Mr Kwarteng’s budget announcement.
- Kwarteng has announced a staggering £45 billion worth of tax cuts. He has announced that the government will abolished the top rate payable for high earners, and brought forward a 1p cut in the basic rate to next April.
- He has announced that they will reverse the national insurance hike, as well as scrapping a planned increase in corporation tax from 19p to 25p and limits on City bonuses.
- Huge changes to stamp duty rules. Stamp duty is being scrapped up to a purchase price of £250,000 for second time home movers and up to a whopping £425,000 for first-time buyer. A lift from the previous limits of £125,000 and £300,000 respectively. The announcement hasn’t specifically said anything about people expanding their property portfolio by buying an additional property or properties yet so there may still be an extra stamp duty charge (which was previously an extra 3% on top of standard stamp duty).
- Beer, wine and cider duty rises are being cancelled – and in an effort to bolster tourism overseas visitors will be able to shop VAT-free.
- Low-tax and low-regulation ‘Investment Zones’ are being created across the country. These zones are designed to benefit new startup companies by making them exempt from normal business tax rates.
What The Chancellor Has Said
Commenting on the Bank of England’s latest statistics showing inflation rising, the Chancellor addressed parliament saying:
“Growth is not as high as it should be. We are determined to break that cycle. We need a new approach for a new era. This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s. We are determined to break that cycle. We need a new approach for a new era focused on growth.
That is how we will deliver higher wages, greater opportunities and sufficient revenue to fund our public services, now and into the future. That is how we will compete successfully with dynamic economies around the world. That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth. We will be bold and unashamed in pursuing growth – even where that means taking difficult decisions. The work of delivery begins today.”
What Does The Stamp Duty Change Mean For The Housing Market?
So what does this mean for house purchases? Well, for property investors and buy-to-let landlords it’s not completely clear yet as it seems that the government still need to announce how (if at all) they will be taxed on property purchase. But, for home movers and first-time buyers, this could be potentially a bit of a boost. For people who are looking to sell their current home and move to a new property, their stamp duty liability could be hugely reduced. Although the actual rate of stamp duty has not changed, the threshold has risen to a purchase price of £250,000. So, if you were buying a flat or a house at £249,000 you wouldn’t need to pay any stamp duty!
First-time buyers have benefitted from stamp duty discounts and exemptions for a long time but today sees the largest stamp duty exemption ever. First-time buyers can now purchase a property up to £425,000 without having to pay any stamp duty at all. But, critics would still argue that this does not improve the position of first-time potential buyers in the market as this will likely push purchase prices up, increase more competition in the market, and with high lender interest rates buyers are being priced out anyway. So raising the stamp duty threshold might not be as beneficial as it first seems.
One of Oportfolio’s senior mortgage and protection advisors Jade Pinkerton has commented: “This is great news for first-time buyers across the country but especially for those buying in London and the South where property prices are much higher than average. We hope that this will give new buyers a bit more encouragement to speak with a professional like myself and see what really can be possible to purchase.”
The Energy Bill Crisis
Following Liz Truss’s announcement a couple of weeks ago that she would be pushing for a freeze on energy bills for 2 years to help struggling families who are suffering from extortionate energy prices. The Chancellor confirmed this freeze in his budget announcement, specifying energy bills will be frozen up to a typical £2,500 for households. But he has announced that doing so would cost around £60billion just for the first six months.
If you or anyone you know needs to discuss anything to do with the new budget announcement and mortgages or property, please give our team a call today. We are here to answer all your questions and give you any guidance you need.