Raising the nil-rate band of stamp duty to £300,000 and introducing government-backed guaranteed mortgages could be key to economic recovery, according to David Hannah, principal consultant of Cornerstone Tax.
The stamp duty holiday, which is due to end at the end of next month, has provided a welcome reprieve to first-time buyers.
Hannah says that research shows that roughly half of all home purchases during the second half of last year came from first-time buyers, following a fall of 13% in the first half of 2020, thanks largely to the tax break.
Despite this help, a study by Cornerstone Tax found that almost a fifth – 18% – of first-time buyers have only been able to get on the property ladder because of the recent stamp duty holiday.
Based on its finding, Hannah believes that the picture is rather bleak for the younger generation. To help remedy this issue, he is calling on the government to raise the nil-rate band of stamp duty and introduce guaranteed mortgages
Hannah said: “The approaching end of the stamp duty holiday is already having a profound effect on the property market, sale collapses are approaching record highs and solicitors and the drop in first-time buyers seen in the first half of 2020 could be set to return if nothing is done.”
Given that more needs to be done to help get people get on the property ladder, the tax expert believes that government-backed purchase mortgage guarantees for borrowers would be a good way to reinstall confidence in the lending market.
He explained: “If the terms of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and keep the market moving post the holiday.”
Alternatively, raising the nil-rate band of stamp duty, to somewhere around £300,000, would benefit the majority of buyers without affecting a large amount in tax revenues, which Hannah believes “is obviously key to the recovery of public finances”.
He added: “These statistics demonstrate the importance of keeping the market moving to other sections of the economy and first-time buyers, those likely to spend less than £300,000, are the driving force behind this movement.
“Home ownership is key to the UK economy, upward mobility and the aspirations of many that are currently struggling to get on the property ladder. Not only this but making it easier to move house without being penalised for doing so will make it easier to move to areas of growth and where jobs are. Especially important as we see a de-urbanisation and migration away from cities in the wake of the pandemic.”
Wow! False news! The tax break has primarily benefited 95% or more of investors and second purchasers. As for us first time buyers, the lending criteria and price hikes on properties etc have left thousands hindered! Revenue is required if not from sdlt, there’s options, however scrapping it will only inflate false prices and have first time buyers left cornered.
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Fair point when you look at it like that St4r………….
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Mr Hannah would do well to look at how much the bank of mum and dad has put into property allowing their offspring to get into the property nexus. This myth of the disenfranchised FTB who can never afford to buy and needs special help. is just that a myth. If you are a first time buyer in Newcastle, what does a two bed flat cost? £45,000. You see not everyone lives in London, I know it is a shock but 268,000 people live in this one area of the UK alone, the point being yes if you are a first time buyer and you are buying a two bed flat in Chelsea, that is 1.3M. Also since 2017, and this may be a bit of a shock – to the principle tax adviser – ‘First time buyers buying a property under £300,001 which they live in as their main residence pay zero that is ZERO SDLT – stamp duty to you and me’ so the SDLT holiday would have zero impact of first time buyers. I have no problem on manufactured stories – but at least can they be rooted in fact? Ignorance of the basic realities of the real estate ecosystem and the tax relating to it is a bit of a shocker if you are meant to be a specialist in the area – my suggestion look up the HMRC government guidelines to SDLT.
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I wonder how many Accountancy publications seek the Counsel of an estate agent claiming that he surveyed his Clients, and found most believe that the current personal taxation is unfair?
Leave the Property Market to Agents, Solcitors, Conveyancers Mortgage Lenders and Surveyors and we’ll leave the taxation system to Accountants 🙂
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The government need to help the first time buyers. Since the help to buy has changed and been capped 90% of propertys for an average sized family are now not able to buy a new build. The average price is between 30-70k more than the capping. The house prices in general are so high atm. I’m a first time buyer we now would only be able to buy a 2 bedroom house due to affordability. We are a family of 5 and this sized house is not practical. Why aren’t the government helping people. Why have the government not extended the original htb with a reasonable cap of 300k. 600k was utterly ridiculous anyway
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The principal impediment for FTB is the ridiculous MMR and effective banning of IO resi mortgages for the average person who has borrowing requirements in excess of 75% LTV. Any home purchaser should be permitted IO mortgages like LL are allowed. There should be NO repayment vehicle required like the situation is with LL. Selling a home to redeem an IO mortgage should be accepted as a perfectly valid way to redeem a resi mortgage. If that leaves the homeowner homeless that is their lookout. LL are perfectly aware that if they pay off the mortgage there is no lender to satisfy. IO only resi mortgage holders are perfectly capable of working out how much extra they need to put by to be able to redeem a resi mortgage. Indeed many lenders provide online ready reckoners to enable homeowners to determine how much is required on a monthly basis to clear a mortgage by term end. Though of course a transfer to a RIO mortgage would make far more sense. So effectively no end of the IO mortgage term. If OO choose not to save the additional monthly amount to pay down the capital that is their problem. IO only mortgages serve LL perfectly effectively. But LL under PRA requirements have far more onerous mortgage criteria to meet. Aspirant OO can have just a 5% deposit requirement which enables them to compete with LL far more effectively. Personally I would have no objection if aspirant OO are able to have more advantageous mortgage terms than LL. I’d far rather see an increase in homeownership than an expansion in the PRS. I’d much prefer this to occur with a commensurate vast reduction of the PRS. IO only resi loans with NO repayment vehicle required for joe public are the answer
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