Seeking to ease the pressure on first time buyers and boost the supply of new property, UK Chancellor Philip Hammond outlined a package of measures in his Autumn Budget on Tuesday 21 November.
Cutting Stamp Duty for first time buyers on property up to £300,000 (and on the first £300,000 of homes up to £500,000), he ensured that the budget received a warm welcome from young people and their parents, as they continue to face obstacles in becoming home-owners.
Chancellor Hammond estimated that the change would help ’95 per cent’ of first time buyers. Property professionals warned that removing Stamp Duty could simply lead to higher prices, but the Institute for Fiscal Studies pointed out that buyers would still benefit from the change, since ‘the amount they had to pay in buying the house would be fully reflected in the value of the house, instead of some of it going in tax.’
The giveaway was part of a £15 billion tranche of funding to address the UK’s housing issues, as supply and demand drift further apart, leaving many residents unable to afford their own homes. Around £8 billion of the total is to provide guarantees for house builders, to encourage them to develop hundreds of thousands of properties each year.
The Chancellor also promised to address ‘land banking’, to encourage more prompt development of available land. Real estate commentator Russell Quirk applauded the move and called for tax incentives for developers, “so that they actually build rather than land bank.” He added that reclassifying some areas of the UK’s green belt could “go a long way in addressing the shortage of property.” Embarrassingly, it emerged that Philip Hammond has a financial interest in a developer – Castlemead Limited – that had left a plot empty for seven years after winning permission to develop it.
Further into the future, Hammond announced that non-resident companies with income from property assets in the UK will be charged corporation tax, rather than income tax, from April 2020. This could provide a welcome bonus for these companies, since corporation tax is currently lower than income tax, although it can be more complex to administer.
Non-resident owners of UK residential property should also note that the Finance (No. 2) Act, which came into force on 16 November, makes them liable for inheritance tax.
Although there remain uncertainties about the UK’s economic performance in the years to come, the health of its property sector remains robust, with these latest measures designed to ensure its continued strength.