New stamp duty rules for residential property – what’s changed?
As from the 4th of December 2014, the stamp duty for the majority of homebuyers has been given a fair and significant cut.
The old rules attracted wide criticism as being outdated and simply unfair. Until today, stamp duty in the UK would have been charged based purely on the total purchase price of the property. The rules meant that the total price would be placed into a stamp duty tax band and any increase in the price, even a fluctuation as small as a £1 rise, could cross the threshold and cause the stamp duty to automatically jump up significantly, incurring potentially thousands of pounds more in charges because of that £1 rise.
The changes today have made the system more comparable to the familiar income tax structure in that you will now only pay the higher rate of tax on the part of the price that has gone into the next tax band. For example if you were buying a property for £185,000 you won’t have to pay any tax on the first £125,000 and 2% on the remaining £60,000 – a saving of £650. A further example is that someone buying a home as from today for £275,000 would pay £3,750 in stamp duty, rather than £8,250 under the old rules – that’s a saving of £4,500!
Please see the HM Treasury statement which includes a useful link to a reliable online calculator. The statement clearly and simply sets out the new rules and we suggest that you may wish to use the same as a point of reference. Clearly the new rates will give a significant boost to the property market and benefit the majority of people preparing to purchase their homes. If you need any further details please do not hesitate to contact us on 01603 610911.
Leathes Prior’s David Clarke – Partner and Head of The Conveyancing Team comments:
‘The profession has, for many years, been asking for changes to the stamp duty levels to reflect substantial increases in property prices since the previous levels were imposed. The changes are very welcome to make a fairer system, whereby previously the rate was paid at a single rate on the entire property price, now it is paid only on the part of the property price within each tax band – very much like income tax. By way of example, when purchasing a property at just over £250,000, under the previous rules duty rose from 1% to 3% of the whole price leading to stamp duty on a property at say £260,000 of £7,800. Under the new system, duty would now be payable in the sum of £3,000.’
Please note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any specific circumstance.