Finance

Budget in Brief

Budget

The economy may not be doing as well as he had hoped, but there was plenty of good news for first time buyers in Philip Hammond’s second Budget as Chancellor

Stamp Duty
First time buyers will be celebrating changes to Stamp Duty that will see 95% of those purchasing their first home saving money, and 80% now paying no tax at all. Changes are as follows:

  • No stamp duty will be payable on properties worth up to £300,000 being bought by first time buyers
  • On properties costing up to £500,000, no stamp duty will be paid on the first £300,000, while the remainder will be charged at five per cent. (If the home is worth more than £500,000 there will be no first time buyer discount)
  • The actual cash savings will depend on the price of the home. Homes under £125,000 are already exempt from Stamp Duty, so there will be no saving for those buyers. First time buyers will save £1,500 tax if they buy a £200,000 home, or a £5,000 saving on homes between £300,000 and £500,000.

However, there are a few devils lurking in the details:

  • Couples buying together will only get the discount if both are first time buyers – if one has owned property before there will be no discount at all, including if parents are co-purchasing
  • The Office of Budget Responsibility predicts that house prices will rise by 0.3% as a result of the policy, which could reduce the impact of the saving
  • If you completed on your home before Budget day you will still have to pay your Stamp Duty as normal, but if you have exchanged but not completed until on or after November 22nd you will receive the discount
  • If you want to buy your first home as an investment, or to rent out while you live in rented accommodation elsewhere you are out of luck; it must be your only or main residence
  • The discount won’t apply to those buying in Scotland, and in Wales it will only apply until April 2018 when Stamp Duty is devolved to the Welsh government (although Scotland and Wales could choose to introduce the policy)

House purchase
Recognising that many first time buyers struggle to achieve the loans they need, the Chancellor made a couple of announcements:

  • He confirmed earlier plans to invest £10 billion in the Help to Buy Equity Loan Scheme that allows people to buy with just a 5% deposit, supporting another 135,000 people to buy a new home
  • The government will launch a £2 million competition for firms to develop  a technological solution that will enable a history of meeting rental payments on time to appear in credit scores and mortgage applications

Housing Supply
The chancellor admitted: “The only sustainable way to make housing more affordable over the long term is to build more homes in the right places.” To try to achieve his end of creating 300,000 new homes a year, he made a number of announcements about future housing plans:

  • Good quality, high-density housing in cities will be a priority. The Government will consult on plans to enforce minimum densities for housing development in city centres and around transport hubs, increase compulsory purchase powers, make it easier to convert shops and office into housing and even make it a permitted development right to allow commercial buildings to be demolished and replaced with homes
  • The Government will consult on a new policy which would require local authorities to grant planning permission for new developments that aren’t in Local Plans, providing that a high proportion of the homes are offered for discounted sale for first time buyers, or for affordable rent. The Green Belt will still be protected
  • There will be five new garden towns, including in areas of high demand such as the South East
  • One million new homes will be built in the Cambridge-Milton Keynes-Oxford corridor by 2050
  • The Government will invest a further £630 million to accelerate building on small sites by funding infrastructure
  • £204 million of funding will be provided for training in construction skills to ensure the availability of an adequate workforce

Personal Taxation
There were few giveaways here, but some measures might be of benefit to those trying to save a deposit:

  • The tax free personal allowance rises to £11,850 and the higher rate threshold to £46,350, in line with inflation
  • The national living wage for workers over 25 will increase by 4.4% in April, from £7.50 an hour to £7.83, with bigger increases for younger people. The minimum wage for  21 to 24-year-olds rise 4.7% to £7.38 per hour and the minimum for 18 to 20-year olds by 5.4%  to £5.90 per hour

Other decisions were somewhat disappointing:

  • The band of savings income that is subject to the 0% starting rate will be kept at its current level of £5,000 for 2018-19, not even benefiting from an inflation increase
  • The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000, so no increase in the amount that can be saved tax free in ISAs

Call Which? Mortgage Advisers on 0800 316 0822 for impartial advice on the best mortgage deal for your personal circumstances.

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