!Earlier this month, George Osborne, Chancellor of the Exchequer announced plans for a complete reform of Stamp Duty Land Tax (SDLT), in the process destroying the previously existing slab structure. Osborne announced that the new rates, will reduce stamp duty for 98% of buyers.
In simple terms, Stamp Duty was charged in bands from £125,000 and above between 1% and 7%, this was dependent upon the properties’ value. The criticism that the previously existing method received has led to the introduction of the new system in which buyers will only be levied progressively above thresholds.
The new rate of Stamp Duty is as follows:
Up to £125,000 – 0%
£125,001 to £250,000 – 2%
£250,001 to £925,000 – 5%
£925,001 over £1.5million – 10%
Over £1,500,001 – 12%
As an example, if the purchase price of a property was £185,000, the buyer would pay no stamp duty up to £125,000, but would pay 2% on the remaining £59,999 value of the property above the threshold, thus the payable Stamp Duty would be £1,200.
Stamp Duty is an historically unpopular tax as a result of how it is charged. Since its original introduction SDLT rates have seen dramatic changes in rates, with house price inflation being the catalyst for a such fluxes. With 98% of buyers expected to pay less as a result of the important reform, Osborne’s move may prove a popular one.
The latest reform came into effect on the 4th December in England and Wales. In Scotland, however, a different system will be put into place on the 1st April when Land and Buildings Transaction Tax (LBTT) replaces SDLT.
For more information on changes to Stamp Duty Land Tax, speak to the Mortgage Centres.