From 4 December 2014 Stamp Duty Land Tax, payable on the purchase of a residential property, will be charged at different rates depending on the portion of the purchase price that falls within each rate band, making it more like income tax. Gone are the days of property prices being distorted and held back when near to the old Stamp Duty band thresholds. Undoubtedly the new system of calculating duty is fairer than before although the duty itself as a tax on moving home and the rates themselves will always be contentious.
Chancellor George Osborne said 98% of homeowners in England and Wales would now pay less after the changes than they would under the old system. It is thought on average, someone buying a home in England and Wales will now pay around £4,500 less in Stamp Duty. For example, someone buying a house for £550,000 will pay nothing on the first £125,000, and then 2% on the next £125,000 (£2,500), and then 5% on the next £300,000 (£15,000) giving them a total bill of £17,500. Previously they would have paid 4% on the total purchase price, giving them a bill of £22,000. Whilst the percentage rates are higher in some cases, the overall duty will mostly be lower. This can only be good for the property market and for those people trying to get onto the property ladder
Nevertheless, people who buy homes worth more than £937,500 will now pay more in tax than they would have before. The value of properties in the South and in particular in places like St Albans, will mean many more transactions will be affected by this increase. Whilst those purchasing at more than £937,500 will be required to pay more duty than they would have under the old system, such purchases frequently represent family homes which are enjoyed for many years.
The new rates are
- Up to £125,000 = 0%
- Over £125,000 to £250,000 = 2%
- Over £250,000 to £925,000 = 5%
- Over £925,000 to £1.5m = 10%
- Above £1.5m = 12%
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