Updated 03 September 2020
Philip Hammond’s first Autumn Budget brought a windfall for first-time buyers, with a spectacular slashing of stamp duty. Will it finally unclog the UK’s housing market? We look at this and other key announcements from a Budget that focused largely on the young.
Speaking on talkRADIO on the morning of the Budget, Unbiased founder Karen Barrett predicted the big highlight of today’s speech by the Chancellor. ‘Homes and housing is going to be a biggy,’ she said, adding, ‘I think the headline on this Budget is going to be “Intergenerational fairness” and making sure that everyone gets a break.’
It turned out to be pretty accurate, as in a case of ‘better late than never’, the Chancellor seemed to notice at last that the under-30s exist, and did his best to win them over. The highlight of the first Autumn Budget was the announcement that there will no longer be any stamp duty on homes bought by first-time buyers for under £300,000. Furthermore, in expensive areas (such as London) there is to be no stamp duty on the first £300,000 of first-time buy properties up to £500,000. Philip Hammond stated that these changes would take place with immediate effect – meaning that eight out of 10 first-time buyers won’t have to worry about stamp duty at all anymore (at least, not until they buy their next home).
The good news for first-time buyers didn’t end there. The Chancellor confirmed his target of building 300,000 new homes per year by 2020, with the focus being on urban, high-demand areas. The popular Help-to-Buy scheme, which enables first-time buyers to boost deposits with government equity loans, is to be extended with another £10bn. Meanwhile, new powers for local authorities to purchase and develop land are another measure aimed at un-clogging the housing market.
Philip Hammond has also wised up to the number of potential homes standing empty. Now second-home owners are to be penalised if they leave them unoccupied, as a Council Tax premium of 100% will be levied on empty properties. This announcement should be welcomed by renters struggling to find affordable accommodation, and may also bring more properties onto the market as owners choose to sell rather than pay the premium.
The Chancellor clearly has his eye on the government’s target of the raising of the personal allowance to £12,500 by 2020, and the higher-rate tax threshold to £50,000. In his Budget speech he announced steps in that direction, raising the personal allowance to £11,850 from April 2018, and the higher-rate threshold to £46,350. Ironically the latter may end up penalising some near the threshold, as people making pension contributions may lose out on higher-rate tax relief. It may be worthwhile for individuals near this income level to ask their financial adviser about making extra contributions before the change (or else, talk to their boss about a pay rise!).
The Budget was low on big handouts, but there was still something for small businesses to smile about. The VAT threshold was held at £85,000 for the next two years, while rises in business rates are now to be pegged to CPI inflation rather than RPI, so as to be generally lower and fairer. Vans are also be exempt from the new hike in excise duty on some diesel vehicles.
So what happened to the pension announcements? Before the Budget there were widespread rumours that there were to be cuts in pension allowances and possibly higher-rate pension tax relief too. These rumours have risen before, but once again they failed to materialise. It now looks as if the government’s current weak majority has put such radical changes firmly off the agenda for the foreseeable future, so pension savers can breathe a sigh of relief and go back to planning for their retirement with greater certainty.
Want to find out how the Budget will affect you personally? The best way is to talk to a financial adviser.