2010 budget: Stamp duty exemption is aimed at winning votes. The 2010 budget stamp duty exemption on properties below £250,000 is sure to be a winner with younger voters

The thoughts of Jill Hiney from The Guardian about the changes to stamp duty.

Despite price falls and repossessions, the UK voter still regards their home as their castle, and Alistair Darling clearly recognises that promoting home ownership can win votes.

The chancellor has announced a two-year stamp duty exemption for first-time buyers purchasing a home costing less than £250,000 – with immediate effect from midnight last night. This will save people up to £2,500, which might not sound that much, but when you are a first-time buyer, it can make a difference to where you buy and whether you can afford furniture after you move in.

The move is sure to be a winner with younger voters (and as many first-time buyers are now in their 30s, I use the term “younger” quite loosely).

Despite initial scepticism about the value of stamp duty holidays last time round (when it was worth up to £175,000 to people buying property up to £175,000 in value), it helped 260,000 homebuyers and there was a real rush from buyers trying to sneak their purchase through before the last exemption ended in December. As Darling pointed out in his speech, it supported the entire housing market when it needed it most.

This time round Darling expects the exemption to apply to nine out of 10 new entrants to the market, who will buy curtains, TVs, fridges, and so on, giving the wider economy a boost.

But the move won’t please all homebuyers. The cost has been neatly neutralised with a increase from 4% to 5% in the stamp duty on properties costing £1m or more from April next year. The latest figures from the Land Registry show that in November last year 480 homes in England and Wales sold for more than £1m, so there are potential votes to be lost with this move.

The change prompted questions about what constitutes a first-time buyer. But people who sold homes at the peak of the market and then rented to become cash buyers once property prices had dropped can forget about making the exemption the icing on their cake. They do not qualify and the Revenue says they will be breaking the law if they make a false declaration: they could face fines of up to £5,000 and possibly a spell at her Majesty’s pleasure.

The exemption could even back fire on first-time buyers within just a few months. This stamp duty holiday will contribute to rising house prices just like the last one, taking property prices out of the reach of those at the bottom of the property ladder. In two years’ time, buy-to-let investors could again be the only people able to afford the classic one- or two-bedroom first-time-buyer property.

Darling is also aiming to save money through another property-related change. The budget contained news that the government is planning to stop large properties in expensive areas being let to people on housing benefit.

Again this is a move that is likely to prove popular with the readers of the rightwing press. There has been considerable chuntering about immigrants moving into luxurious homes at the expense of taxpayers who could never afford to live in such properties. But the families who are in such big and expensive homes have usually been placed in them by the local council because of their size. This is particularly likely to affect claimants in London, where it’s hard to find big family-sized houses in some boroughs costing less than £1m, with rents to reflect that. Is the government really suggesting that large families should be squashed into smaller properties so several children have to share a bedroom, or even worse, split up? If this part of the budget is approved, it’s likely that affected claimants will have transitional protection for three to six months, but even then it could mean moving children from their schools and low-income earners further away from the their place of work.

The final significant property-related move in the budget was the freezing of inheritance tax. This is an easy target for Darling – not many Labour voters get very upset about a tax that is paid predominantly by the rich.

In 2007 he was pretty generous to married couples and those in civil partnerships, allowing the nil rate band to be transferred form the first spouse to die to the surviving one. This meant that only 12,000 estates were expected to pay IHT in the 2009/10 tax year – the lowest since records began in 1938.

But with property prices up nearly 10% last year and likely to continue increasing thanks to the new stamp duty exemption, an increasing number of households will start to be caught in its net again. If you have children to whom you want to leave money, it’s one to keep an eye on.

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