Rachel Reeves’ hike on stamp duty for second properties has left many people scrambling to complete deals before the new tax came into force.
Stamp duty on second homes has increased to 5 percent (Image: Getty)
Rachel Reeves’ increase in stamp duty left many homeowners scrambling to complete deals to avoid paying thousands more in tax.
On Wednesday, the Chancellor announced £40 billion of tax rises, including a levy on the stamp duty paid when purchasing a second property.
The tax, which raised stamp duty on second properties from 3 percent to 5 percent came into effect last night, leaving many hurriedly rushing to complete deals before the deadline to save thousands.
But another group of property buyers are set to be hit hard by the new measures.
Those who have found their dream home but are not in a position to close the chain on their current properties have been known to “let to buy”, where they essentially rent out their previous property and claim the stamp duty surcharge should they sell within three years.
The move could have a devastating effect on existing chains (Image: Getty)
But having now been left two days’ notice of a 2 percent rise in tax, some are faced with having to find thousands of pounds within hours. One broker said his client would be forced to find an additional £15,000 “effectively overnight” in light of the Budget, the Telegraph reports.
The measure is expected to raise around £400 million by 2029, according to the Office for Budget Responsibility (OBR), though the Treasury expects to raise a further £310 million in that timeframe.
The primary motivation behind the move is to curb the increase in buy to let and holiday home purchases in the hope that it will increase the amount of properties available to those looking to buy their primary residence.
The Chancellor’s decision is an attempt to curb the rise in buy to let purchases (Image: Getty)
Steve Humphrey, of brokerage The Mortgage Pod, told the Telegraph that the Government’s decision to give home buyers “little to no notice” was “simply ridiculous”.
He added: “The stress and panic this has caused is unnecessary and it will be brokers and solicitors that need to pick up the pieces. Lots of work will be for nothing and parties will lose money for no real reason.
“Not to mention, if the two clients of mine who are affected pull out, the Government will lose the £8,700 and £8,200 stamp duty bills they would have paid yesterday. This short-sighted decision will actually cost them, without a grace period.”
Many fear that the increase in stamp duty will have an adverse effect on many currently in the process of buying and selling, as buyers either look to renegotiate agreed prices to negate the charges or withdraw from the purchase altogether, breaking the chain for several more transactions.