In an attempt to revive the UK economy, Chancellor Kwasi Kwarteng has announced the biggest tax cuts the UK has seen in 50 years.
How will this benefit homebuyers?
Stamp Duty Cuts
The tax-free band has doubled from £125,000 to £250,000 and for first-time buyers, this will be raised from £300,000 to £425,000 – saving 200,000 people from paying stamp duty as a result.
This will benefit homebuyers in London and South East of England the most, where it was reported by Zoopla that 76% of all stamp duty is paid due to higher house prices.
The previous stamp duty holiday tremendously encouraged activity in the housing market, and with mortgage rates increasing, this should allow for additional funds towards affordability and home moving costs.
Income Tax Cuts
For those earning between £12,571 to £50,270 per year, income tax will fall from 20p to 19p in the pound from April 2023 – benefitting more than 31 million people with an average reduction of £170 a year in tax.
Taxpayers earning more than £150,000 a year will have the 45% tax rate scrapped and reduced to 40%, aligning with those who earn more than £50,270.
This will have a huge impact on affordability for homebuyers, allowing them to retain more of their income which they can use to offset the increases in household bills and other costs of living. This should benefit borrowers when lenders are assessing their affordability.
Whilst these are still set to rise in October, the Government has announced the typical household energy costs will be limited to £2,500 a year until 2024.
National Insurance Cuts
The recent rise of 1.25% in National Insurance will be cancelled on November 6th – saving nearly 28 million people an average of £330 per year and benefitting those earning over £12,570 per year the most.
How will this benefit Investors?
Corporation Tax Rise Abandoned
Under the previous Chancellor, corporation tax was due to rise to 25% in April 2023. However, this has now been reversed and corporation tax rates will remain at the current 19%. This is seen as a massively positive statement to encourage businesses to invest in the UK.
This also benefits those Property Portfolio Landlords with multiple properties held under a limited company structure. These additional profits offer an opportunity to reinvest and expand their existing portfolio.
Geoff Garrett, Co-Founding Director of Henry Dannell, comments:
With increasing inflation and further rate increases from the Bank of England (BoE), it is a surprising move from the Chancellor. Whilst positive, we will remain sceptical in reviewing the impact on the growth of our economy. Though, if the previous stamp duty holiday is anything to go by, we expect to see this have a positive impact on the housing market – particularly for first-time buyers.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.