why the mini-Budget was anything but mini
Chancellor Kwasi Kwarteng’s so-called mini-Budget was one of the most revolutionary Budgets seen in a generation. Extensive tax cuts aimed at boosting the UK’s economy have since sent the markets, and pound, into freefall.
Mr Kwarteng announced that the additional rate of tax of 45 per cent would be scrapped, while the basic income tax cut would be introduced a year early, in April 2023. The planned corporation tax increase will not now happen while the cap on bankers’ bonuses will also be removed. The planned National Insurance increase was also reversed.
stamp duty reduction
It had been well flagged that something was about to happen with stamp duty and so it came to pass with Kwarteng doubling the nil-rate band at which stamp duty becomes payable from £125,000 to £250,000, saving all buyers £2,500 from immediate effect. He went further to assist first-time buyers; previously they did not have to pay stamp duty on the first £300,000 of a purchase – this was increased to £425,000. He also increased the value on which first-time buyers can claim relief from £500,000 to £625,000, particularly useful for buyers in the southeast of England.
At MT Finance, we have long been calling for a reduction in stamp duty, targeted at downsizers in particular as many are put off from moving due to the high cost. This would encourage them to move and free up family homes for those trying to move up the ladder. While the Chancellor didn’t go down this route, the stamp duty concessions he did announce should help first-time buyers get on the ladder, allowing them to offset the higher cost of mortgages with the stamp duty saving. Activity at the bottom of the ladder tends to filter upwards, ultimately benefiting all buyers and sellers.
The housing market needs that encouragement and push at the entry level, increasing confidence, bringing more sales to market and, in turn, stabilising values.
Reducing taxes should boost businesses and encourage them to invest and grow, while the stamp duty reductions, which could have gone further, should still be welcomed by first-time buyers in particular who are struggling to pull together deposits.