Would Tories’ Stamp Duty Policy really turn renters into buyers?

Over the weekend the Conservatives pledged that if elected on July 4 they would permanently scrap stamp duty for first time buyers purchasing homes for less than £425,000.

The policy as it stands now would end in 2025 - that was the deadline when the policy was introduced in the ill-fated Liz Truss 2022 Mini budget, in which the threshold for full relief from paying stamp duty as a FTB was raised to £425,000 from £300,000. 

In addition, the maximum value for partial relief for FTBs was raised from £500,000 to £625,000.

Zoopla has crunched the numbers of making this relief permanent, and its analysis of enquiries for property from first-time buyers over the last six months shows:

- 8 in 10 FTBs searching for a home on Zoopla have been looking for homes priced under £425,000 i.e. full relief from stamp duty under current rules;

- 15% of FTBs have been searching for homes between £425,000 and £625,000 and would pay partial stamp duty, assuming the current rules are extended;

- 7% of FTBs are looking over the £625,000 threshold and would still have to pay full stamp duty;

- FTBs searching to buy in southern England are generally having to look for higher-value homes and face paying the most stamp duty; and

- Half of would-be FTBs in London would pay full or partial stamp duty if the current rules are extended.

Commenting on reports that the Conservatives will make the exemption permanent in England and Northern Ireland, Zoopla executive director Richard Donnell says: "Our analysis shows 8 in 10 would pay no stamp duty if the current measures were made permanent. The greatest beneficiaries are those looking to buy across southern England where up to half of first-time buyers are looking to buy homes priced between £250,000 and £425,000. 

“We find that 7% of first-time buyers would still pay full stamp duty, most of whom are looking in London and 15% would pay partial stamp duty. A return to the old rules and price thresholds would have seen 30% of first-time buyers paying stamp duty once again.

“The primary challenge for first-time buyers remains the need to afford higher mortgage rates and pass mortgage affordability tests. For many, this means injecting more equity into home purchases to reduce the level of income needed to buy. This impacts buyers across southern England where house prices are highest and average deposits are over £60,000

“Building more homes at a wider range of price points and developing a market for long term fixed-rate mortgages are the key building blocks to help first-time buyers long term" 

Data from HMRC shows that in England, 203,300 FTB’s claimed ‘first-time buyer relief’ from stamp duty in 2022/23 with savings of £708 million, or an average £3,500 per purchase

Some 150,000 FTBs paid no stamp duty at all while 53,000 had to pay partial stamp duty for the purchase price above the current tax-free threshold of £425,000 up to a maximum of £625,000.  Any FTB purchases above this maximum price have to pay the normal level of stamp duty with no tax relief.