A lot of changes had been called for in the 2007 Budget, with many in the housing and mortgage markets calling for the relaxation, or abolition of inheritance tax (IHT) and Stamp Duty thresholds.
In his speech to the House of Commons, Chancellor of the Exchequer, Gordon Brown, said: “Until 2012, all new zero carbon homes up to half a million pounds will be exempt from Stamp Duty.
get the daily news delivered to your inbox
"I can announce the IHT allowance which is £285,000 today, and will rise each year, will in 2010 be increased to £350,000 – ensuring that 94 per cent of estates will not pay IHT.”
Although elements of the Budget were welcomed, including the reduction in income tax, the decision to keep the Stamp Duty threshold static has left many in the market calling for greater action.
Richard Clark, head of product development and marketing at Scottish Widows Bank, said: “We are disappointed that the Chancellor has made no change to the thresholds for Stamp Duty. We believe the government needs to be doing more to help first-time buyers (FTBs).
find out more about this weeks industry news
"Our Graduate FTB report showed that, on average across the UK, 18 per cent of FTBs are paying over £150,000 to get their foot on the property ladder, rising to 42 per cent in London. For this section of the market, Stamp Duty is a particular burden. The majority of these buyers need to stretch their finances to the limit just to secure a property, without having to pay this additional tax. It can often lead to buyers taking on extra debt.
“As house prices continue to rise steadily, we would encourage the government to consider scrapping the tax for FTBs. As the lifeblood of the property market, it is vital that as many barriers as possible are removed to ensure people are not priced out of buying.”
catch up on the industry buzz
David Bexon, managing director of SmartNewHomes.com, commented: “I welcome any initiative that aims to cut carbon emissions and encourage the future development of zero carbon homes across the UK.
However, I fear that government’s latest pledge of Stamp Duty exemption is nothing more than an empty gesture if earlier admissions from the Treasury – that there are currently only 24 carbon zero homes in the UK – are true.”
Paul Smith, chief executive of haart, added: “With the average value of a property in London now over £260,000, the majority of FTBs are looking at properties above £250,000 but they don’t have the vast cash reserves to fund the 3 per cent Stamp Duty of £7,500. Most are stretched to the limit as it is. Stamp Duty will remain a great stumbling block and the Chancellor has done nothing to help.”
Commenting on the Chancellor’s decision to change the IHT threshold, Anne Young, technical director at Scottish Widows, said: “The IHT nil rate band threshold will increase to £300,000 on 6 April 2007 as forecast in previous Budgets and will increase in stages to £350,000 in 2010/11. While this increase is to be welcomed, it will still leave many people with a potential IHT problem as house prices are currently increasing at a higher rate than is the threshold.”
download our news ticker
Discussing the impact of the Budget on the equity release market, Jayne Almond, CEO of Stonehaven, said:
“Measures to reduce VAT on certain home adaptions for the elderly will encourage more people to use equity release to stay in their homes longer.
While the Budget has increased the zero-rate band for IHT to £350,000 by 2010, rising house prices means that there will still be a significant number of householders who will be affected by IHT. These homeowners are likely to turn to equity release in order to reduce IHT.
register for the next forum
“The Budget identifies the ageing population as one of the major long-term issues which needs to be addressed. This together with rising homeownership and lower pension provision is likely to encourage the growth of the equity release market.”
