As has been widely reported, the headline news in yesterday’s autumn statement from the Chancellor of the Exchequer was the much needed overhaul of the way Stamp Duty is calculated. The new system is much fairer and the vast majority (reputedly 98%) of buyers will now pay significantly less tax on residential property purchases that complete from today, 4th December and onwards.
Previously a buyer paid duty on the whole purchase price of the property, the rate being determined by which price band the house fell into. This was something that impacted on the saleability of homes whose true value fell just into the threshold of a higher band, for example the duty payable for a house that sold for £500,000 was £15,000 and for one that sold for £500,001, it was £20,000, the additional £1 costing a buyer an extra £5,000 in tax.
Under the new rules, the amount of duty is based on incremental bands. New rates have been set but a buyer only pays tax on the portion of the sale price that falls within each band. It has also resulted in the first £125,000 of any house purchase being free of any liability. The new bands and rates are set out below:
Purchase Price of Property New Rates
£0 – 125,000 0%
£125,001 – 250,000 2%
£250,001 – 925,000 5%
£925,001 – 1,500,000 10%
£1,500,001 and over 12%
Note that tax is paid on the part of the property price within each tax band
Notes from HM Treasury explaining the reforms in more detail can found on the link: Stamp duty – factsheet . There is also a link to an on-line calculator: http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
We completed on the sale of a client’s property this morning. Originally the completion date had been set for yesterday but by happy chance the seller and purchaser agreed a few days ago to change it to today, a lucky break for the buyer as she ended up saving £3,000!
There has been considerable speculation in the media since yesterday’s announcement as to what effect these changes will have on the housing sector with predictions that they may lead to fresh stimulation of market activity and a rise in property prices. It remains to be seen what will happen in reality and whilst lowering the cost of house buying is clearly good news for the industry, those of a more cautious disposition may argue that the positive impact will be negated by concerns about next year’s general election, the wider economy and possible interest rate rises.
If you have any views on these changes or would like further information, please get in touch, it would good to hear from you!