This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
The revamp of the Stamp Duty system, presented in the Autumn Statement, will benefit investors looking to expand their property portfolio.
The new rules will come into force for anyone purchasing a property after 00:01 on 4th December.
Formerly, Stamp Duty was calculated using a slab structure. This determined the entire cost of the tax based on which band a house fell into.
Stamp Duty Revamp Benefits Investors
This caused wide gaps in the tax bill from each band. For instance, a property that costs £249,000 will bring a bill of £2,490 at the 1% rate. But if a house is £250,001 the bill will be around £7,500 at a 3% rate.
Mortgage providers and estate agents have often said that this system caused property prices to cluster just below the thresholds.
Chancellor George Osborne said that this structure will be overturned, and from 4th December, Stamp Duty will be calculated similarly to income tax.
As before, there will be no tax on houses up to £125,000. Above this price, there are a few bands:
- Between £125,001 and £250,000, the rate is 2%
- Between £250,001 and £925,000, the rate is 5%
- Between £925,001 and £1.5m, the rate is 10%
- Above £1.5m, the rate is 12%
An example of how the new system to work, based on a £300,000 house, is that there will be no tax on the first £125,000, then 2% on the next £125,000, and 5% on the last £50,000. The first 2% is £2,500, the 5% works out at £2,500, making a total of £5,000. The Stamp Duty using the previous system would be £9,000, which is 3% of £300,000.
Chief Executive of mortgage broker SPF Private Clients, Mark Harris, says: “The long overdue reform of the antiquated slab system of Stamp Duty will result in a much fairer regime. The reforms will negate any scheme abuse where people buy just under a threshold to avoid a big jump in Duty.
“It will make it easier for first time buyers and struggling families to get onto the ladder or move up it as they will need to set less money aside for Stamp Duty and can put more towards their deposit.
“Anyone buying a property for more than £937,000 will pay more Stamp Duty under the new bandings, with the increases becoming more dramatic the greater the value of the property. The result will be a much fairer system, although there will be a flurry of high end exchanges today to beat the changes.
“While the changes will hit wealthier buyers in the pocket, they have to be fairer than a mansion tax as it’s only a hit that is taken once. It will fundamentally change the way we view our homes; people will think much harder about moving, as they are likely to stay put for a number of years. Big moves will be the order of the day rather than several staged moves, particularly for more expensive properties.”1
1 http://www.landlordtoday.co.uk/news_features/Stamp-duty-reform-announced
