Stamp duty reform

First-time buyers to benefit from increased threshold

First-time buyers are likely to be the main winners of the government's stamp duty reform, according to analysis from Halifax.

New thresholds introduced from 3 September 2008 now mean that if you buy property and the purchase price is £175,000 or less you don't pay any Stamp Duty Land Tax at all.

If it's more than £175,000, you pay between one and four per cent of the whole purchase price. The £175,000 threshold (up from £125,000) will remain in place up to and including 2 September 2009. And it is first-time buyers in particular who will benefit from the change, according to Halifax.

The average price paid by a first-time buyer in the second quarter of 2008 was £144,283 with an average stamp duty bill of £1,443. By comparison, the average first-time buyer will pay no stamp duty over the next 12 months.

Therefore, the proportion of first-time buyers who would have paid stamp duty if the threshold had been £175,000 over the past year would have been 31 per cent rather than the 60 per cent of purchases that were above the existing threshold of £125,000.

As such, Halifax estimates a threshold of £175,000 rather than £125,000 would have removed 80-90,000 first-time buyers from the stamp duty tax net over the past year.

However, it remains to be seen whether savings of roughly £1,500, less than one per cent of the purchase price, will be sufficient to attract buyers.