The Chancellor’s Autumn Statement contained a surprise announcement of sweeping changes to the rates of Stamp Duty paid by UK house purchasers.
Previously, Stamp Duty was paid on the full purchase price of a property if it cost more than £125,000. The tax was paid on the full purchase price and the rate depended on the price of property. So the purchaser of a house bought at £150,000 paid 1% tax on the full price – £1,500 and the purchaser of a house at £300,000 paid 3% tax on the full price – £9,000.
With immediate effect this “slabbed” system is abolished and a new “progressive” Stamp Duty is introduced with purchasers only paying tax on that portion of the property’s price that falls within the relevant tax bracket, much in the same way that income tax operates.
Some things stay the same – you won’t have to pay any Stamp Duty on purchases at £125,000 or under. However, above £125,000 much has changed. The new rates of tax are higher, but of course a purchaser is only paying the higher rate on the portion of the price that falls in that bracket. Here are the new rates:-
| Up to £125,000 | Zero |
| Over £125,000 to £250,000 | 2% |
| Over £250,000 to £925,000 | 5% |
| Over £925,000 to £1.5 million | 10% |
| Over £1.5 million | 12% |
So what does this mean for the average house buyer? Well, for most, it will mean paying less Stamp Duty when they buy a house. Using the examples above, the purchaser of a property at £150,000 will now only pay £500 Stamp Duty and the purchaser of a property at £300,000 will now pay only £5,000. Both represent significant savings.
In fact, it is only when a buyer purchases a property at £937,500 that they hit the “break even” point (where they pay the same tax under the new structure as before). According to the Government this means 98% of house buyers in the UK will save money on Stamp Duty.
The converse of savings for 98% of house buyers however, is that the other 2% will see an increase in the amount of Stamp Duty paid on property purchases and those increases will be significant at the higher end of the property market. A purchaser of a house at £6,000,000 will now pay £163,750 more Stamp Duty than under the old system.
Of course, here in Scotland we only have a limited time to enjoy the new system with the introduction of Land and Buildings Transaction Tax set to replace Stamp Duty in April 2015.
More on that to follow so keep checking back!
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