In this yesterday’s Autumn Statement, George Osborne delivered a seemingly promising speech, with plans to support home buyers by providing tax cuts for 98% of consumers.
As hoped by many within the property industry, new rules will be put in place by the government whereby stamp duty will only be incurred on only the fraction that the house price falls within each tax threshold.
“Stamp duty has long been Britain’s worst designed tax. Finally the government has listened to our long fought campaign for a fundamental rethink and reform.” says Chief Executive of the HomeOwners Alliance, Paula Higgins.
“The announcement brings stamp duty in line with how income tax is calculated, a much fairer system. This will also stop some distortions in the housing market by stopping house prices clustering below arbitrary thresholds.”
Whereas with the old system any property valued at over £125,000 would be charged stamp duty on the total amount, under new rules that will come in force tomorrow, on a home that costs £185,000 for example, buyers will see a total saving of £650.
Instead of paying 1% of the property value in stamp duty which equates to £1,850, there will be no tax applied to the first £125,000 and only a charge of 2% on the surplus £60,000, totalling to £1,200.
The burden on the wealthy has also been expanded. Those wanting to buy properties up to £925,000 will pay 5% stamp duty, 10% on homes worth up to £1.5 million, and a final threshold of over £1.5 million where buyers will pay 12% tax.
This reform is said to make the property tax system fairer across the board and the vast majority of home buyers will reap the benefits.
However Higgins speculates further by adding, “While 98% of homebuyers will see a cut, we think the Chancellor missed a trick to really target low and middle income families aspiring to own a home with an exemption from stamp duty for first time buyers.”
Transaction completions made on or after 4th December 2014 will now be subject to these new rules. Completed sales that have not filed for stamp duty will still fall under the old system. Those who have exchanged contracts prior to this date but complete the transaction after will be able to choose between the systems.
Amended Rates of Stamp Duty Paid on Part of the Property Price Within Each Threshold
< £125,000 = 0% stamp duty
£125,001 – £250,000 = 2% stamp duty
£250,001 – £925,000 = 5% stamp duty
£925,001 – £1,500,000 = 10% stamp duty
>£1,500,001 = 12% stamp duty
