George Osborne says a fairer Stamp Duty system is replacing the current “badly designed” rules – he claims 98% of buyers will pay less. But what are these new rules and how can they benefit you?
What is Stamp Duty?
Let’s first find out what Stamp Duty actually is. Stamp Duty, also known as “Stamp Duty Land Tax” (SDLT), is a tax that you have to pay when you buy a property in the UK over a certain price. This is applicable on all purchases of houses, flats and other land and buildings.
How did the old system work?
With the old system, you would essentially pay tax based on a percentage of the purchase price. Prices fall within the following bands:
|Purchase price of property||Rate of SDLT (percentage of the total purchase price)|
|£0 – £125,000||0%|
|£125,001 – £250,000||1%|
|£250,001 – £500,000||3%|
|£500,001 – £1 million||4%|
|Over £1 million – £2 million||5%|
|Over £2 million||7%|
What’s changed in the new system?
With the new system , Stamp Duty still remains payable on all properties sold for over £125,000 but now buyers will only pay the rate of tax on the part of the property price within each tax band. The new tax bands are the following:
|Purchase price of property||Rate of SDLT (percentage between band)|
|£0 – £125,000||0%|
|£125,000 – £250,000||2%|
|£250,000 – £925,000||5%|
|£925,000 – £1.5 million||10%|
|Anything over £1.5 million||12%|
How much will I be saving?
The Chancellor says if you are buying a property that is under £937,000 you will pay less, however anymore than that and you will have to pay more.
Purchase Price: £190,000
Old system at 1% = £1,900
New system = £1,300 (Saving £600)
Purchase Price: £260,000
Old system at 3% = £7,800
New system = £3,000 (Saving £4,800)
Purchase Price: £540,000
Old system at 4% = £21,600
New system = £17,000 (Saving £4,600)
Purchase Price: £1,600,000
Old system at 5% = £80,000
New system = £105,750 (Losing £25,750)
These changes are effective from Wednesday, 3rd December 2014. If you need assistance in any property related matter, then don’t hesitate to get in contact with us. We have over 20 years of experience and have the right expertise to point you in the right direction.