2005 Budget News

18th March 2005

T. Wyn Jones

General consensus is that this last budget was a typical pre-election budget where the Chancellor attempts to show the nation what a good job both he and the Government are doing. This is of course a matter of opinion. What is a matter of fact however is that Mr Brown has tried to address the problem of the first time buyer - albeit many consider he could have done considerably more.

In the budget it was announced that the threshold for Stamp Duty Land Tax on residential property was to increase from £60,000 to £120,000 so as from the 17th March 2005 there will be no stamp duty on the purchase of residential property costing £120,000 or less, for purchases in disadvantaged areas the threshold of £150,000 remains unchanged.

The other bands remain the same, namely - 3% on properties costing more than £250,000 and 4% if consideration exceeds £500,000. Remember it is 1%, 3% or 4% on the full purchase price, so if you buy a property for £121,000 you will pay the government £1,210 in tax.

This lifting of the threshold is a welcome relief, particularly for first-time buyers in many quarters. However, looking through our database of properties for sale I see that those with an asking price of £120,000 or below make up less than a 1/12th of the total number - which is currently in excess of 500.

The Chancellor has also closed loopholes regarding the attempts to avoid paying this tax. The evidence so far suggests that the Inland Revenue will act very swiftly to counter what they view as harmful tax avoidance. Now that schemes to avoid stamp duty land tax will have to be reported as soon as they are ready for market the shelf lives of such are set to become even shorter. Even without these new requirements the Inland Revenue found no fewer than eight schemes to close down in this Budget.

There is no doubt that the raising of the threshold on residential property to £120,000, coupled with the other measures announced by the Chancellor to assist first-time buyers with financing their new home are welcome but it remains to be seen as to whether this will have a beneficial impact on house-builders, or indeed a detrimental impact on the buy-to-let market.