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Budget 2010: Stamp duty cut for first-time buyers

First-time buyers will not pay stamp duty on homes worth up to £250,000, the chancellor revealed in the Budget today.

Chancellor Alistair Darling today cut stamp duty for first-time buyers on properties up to £250,000 from midnight.

The move in the final Budget before the General Election is being seen as a major boon for the property market.

First-time buyers will see a two-year holiday on the stamp duty on properties up to £250,000.

Mr Darling told Parliament the stamp duty holiday in 2008 helped 260,000 home buyers.

“The housing market has now stabilised and has begun a slow recovery. But many first-time buyers, particularly those without large deposits, still find it hard to get a mortgage,” the chancellor said.

“I want to help them, but do so in a way that is properly funded. This means 9 in 10 first time buyers will pay no stamp duty at all.”

To pay for the stamp duty holiday, a new rate of stamp duty will be introduced for homes over £1 million at 5% from April next year.

As lenders have tightened mortgage criteria, demanding higher deposits and bringing down income multiples, first-time buyers have found it harder to clamber onto the property ladder.

This in turn has a greater freeze in the property market as more recent homeowners have struggled to move up the ladder as now fewer first-time buyers are on hand to buy their existing homes.

Helen Adams, founder of first-time buyers' website FirstRungNow.com, said: “This is a welcome if not overdue handout for first time buyers.

“This concession means that spring home-owners all over the country will find it just that little bit easier to buy their first home and invest in their own future.”

She added: “Despite this tax saving, it is still extremely difficult for aspiring home owners to muster enough of a deposit - typically at least 10 to 15% of the purchase price - and we need more lenders to be more flexible about their lending taking into account such as income from a lodger and encouraging guarantors and joint ownership.”

Stamp duty currently cuts in on sales of properties worth over £125,000 to £250,000 at a rate of 1%. A 3% tax is charged on sales from £250,000 to £500,000 and properties worth over £500,000 face a 4% tax.

The changes will see a new band for properties over £1 million at 5% and no tax for first-time buyers buying a home worth up to £200,000.

To be deemed as a first-time buyer an individual must intend to occupy the property as their only or main residence and have not previously purchased a home anywhere in the world.