From stamp duty 'holiday' to energy-saving grants: what Rishi Sunak's statement means for the housing market

The government today unveiled stamp duty cuts to encourage home moves and new funding to support the creation of more energy-efficient households.
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Kristy Gray8 July 2020

Chancellor Rishi Sunak has today confirmed plans to slash stamp duty tax for most home buyers in England and Northern Ireland while also pledging funding for energy-saving home improvements as part of a string of "decisive actions to protect the economy" following the coronavirus lockdown.

While the main focus of today's summer statement was on the urgent need to create jobs, the Chancellor also highlighted the vital role housing will have in the country's recovery, with the sector estimated to contribute £39 billion a year to the UK economy.

He said: "With stamp duty cuts, a £5,000 green homes grant and tens of billions of pounds of new capital projects, we are creating jobs."

Following the total shutdown of the housing market in March this year, property transactions fell by 50 per cent in May, while house prices have fallen for the first time in eight years.

In an uncertain market, Sunak said: "we need people feeling confident to buy, sell, move and improve."

"The average stamp duty bill will fall by £4,500 and nearly nine out of 10 people buying a main home home this year will pay no stamp duty at all," he added.

The government believes new funding for a Green Homes Grants Scheme will help to make 650,000 homes more energy efficient while saving households £300 a year on bills. The measures are estimated to be the carbon-cutting equivalent of taking 270,000 cars off the road while supporting around 140,000 green jobs.

Stamp duty changes

With immediate effect, the level at which home buyers will start paying stamp duty has been temporarily raised from £125,000 to £500,000 until 31 March 2021.

Prior to the Chancellor’s announcement, a home buyer completing on a £500,000 property would have paid £15,000 in stamp duty tax— although first-time buyers were declared exempt on homes priced up to £300,000 in the autumn 2017 Budget.

The changes mean most buyers in England and Northern Ireland will not have to pay any stamp duty at all before the end of March next year.

What does the stamp duty change mean for London home buyers?

However, the overhaul is most relevant in London, where house prices are highest. The average first-time buyer in the capital pays £446,839 for a home, which will come in under the new stamp duty threshold.

The average second stepper pays £685,721 to upsize. In this case their stamp duty bill would drop £15,000 from £24,286 to £9,286.

The change to the threshold is progressive, so according to research by Hamptons, it means that although inner London zones will see the biggest saving, outer boroughs will see the greatest difference.

For example, the average stamp duty bill in Zone 1 could fall by £14,180, which equates to a 15 per cent discount, whereas the average bill in Zone 5 could fall by £9,640, generating an average saving of 69 per cent.

In London’s cheapest borough, Barking & Dagenham, 99 per cent of main residence purchases are now exempt from paying stamp duty tax, with the average buyer paying just £60 compared to the previous amount of £5,860.

What is the Green Grants Home Scheme?

From September, homeowners and landlords can apply for vouchers to help to fund energy-saving home improvements, such as installing insulation or replacing old boilers, an amount which the Chancellor estimates will cover up to two thirds of costs of installing insulation and replacing old boilers in each household.

A further £1 billion will be spent making public buildings including schools and hospitals more environmentally friendly, with £50 million going towards retrofitting social housing with insulation, double glazing and heat pumps.

For low income households, the government will provide vouchers to cover up to £10,000 of improvement works.

How does it work?

The Government will pay at least two thirds of the cost of energy-saving private home improvements under the Green Homes Grant, due to launch in September and last for one year.

This means that for an improvement costing £4,000 a homeowner would pay £1,320, while the Government would contribute the remaining £2,680.

Homeowners and landlords will apply online and be directed to accredited local suppliers, who will provide a quote. Once the work is approved, a voucher for the Government’s share of the cost will be issued.