Stamp duty cut announced, benefiting London first-time buyers most

The Resolution Foundation published an analysis on 24 September 2022 of the Chancellor's September 2022 fiscal statement, which it describes as bringing forward a £45 billion package of tax cuts, the biggest for 50 years¹. The think tank says the statement's cut to Stamp Duty Land Tax in England and Northern Ireland will be felt mainly in the South of England¹.

The Foundation estimates that the tax bill on the sale of the average first-time buyer home in London will fall by £6,300, compared with no gain for the average first-time buyer in the North East¹. It says the South is where the main impact of what it calls a welcome cut to stamp duty will be felt¹. The analysis does not set out the stamp duty thresholds or rates themselves, and does not give equivalent figures for Scotland, Wales or Northern Ireland, where different property purchase taxes apply¹.

The Foundation's wider assessment of the statement covers other tax changes and the public finances. It says the tax cuts confirmed in the statement are strongly focused on higher-income households, driven by the reversal of the rise in National Insurance Contributions, the scrapping of the 45p rate of Income Tax and associated Dividend Tax cuts¹. It estimates that next year someone earning £200,000 will gain £5,220 a year, rising to £55,220 for a £1 million earner, while those on £20,000 will gain just £157¹. On regional patterns, it says those living in the South East or London will see over three times the gains of those in the North East, Wales or Yorkshire, an average of £1,600 against an average of £500¹.

On borrowing, the Foundation estimates that energy support and the weaker economic outlook will increase borrowing by £265 billion over the next five years compared with the Office for Budget Responsibility's March forecast, that tax cuts cumulatively will cost £146 billion over the same period, and that this will raise borrowing to £411 billion¹. It says the Chancellor confirmed that debt falling remains his key metric for fiscal sustainability, and that achieving this by the middle of this decade would require spending cuts of £36 billion in 2026-27, assuming tax rises have been ruled out¹. It adds that this would be broadly equivalent to the total cut to public spending announced by George Osborne in his 2010 Budget, and that debt is on course to rise in each and every year of the forecast period¹.

Why it matters for households

For first-time buyers, the practical effect of the stamp duty change depends on where the property is and what it costs. On the Foundation's figures, the saving on the average first-time buyer home is concentrated in London, at £6,300, while the average first-time buyer in the North East sees no gain¹. The analysis does not report the price at which the London figure is calculated, so the cash saving on any individual purchase is not given¹. Buyers in Scotland, Wales and Northern Ireland pay separate property purchase taxes rather than stamp duty, and the Foundation's regional figures cover England and Wales only in the sense of naming English regions and Wales in its income comparison¹. The rules on who counts as a first-time buyer for property tax and on first-time buyer relief determine whether a purchase qualifies, and the Foundation's analysis does not set out those conditions¹.

The wider tax changes described in the analysis affect take-home pay rather than purchase costs. The Foundation's estimates put the gain for someone earning £200,000 at £5,220 a year and for someone earning £20,000 at £157¹. Its borrowing estimates imply either future spending restraint or further tax rises if the debt target is to be met, though it notes tax rises are assumed to have been ruled out¹.

What happens next

The Foundation says that meeting the debt target by the middle of this decade would require spending cuts of £36 billion in 2026-27, assuming tax rises have been ruled out¹. No further dates for stamp duty changes are given in the analysis¹.