Will you save money in the stamp duty reform?

HM Revenue & CustomsThe average house price in the South East (excluding London) is £346,803*, stamp duty was £10,404 and is now £7,340. A saving £3,064 on the average priced house!

It has been commented that the Stamp Duty Land Tax (SDLT) system in the UK has been well overdue for an overhaul as property prices have changed considerably. The changes announced in the autumn budget may have surprised some who would have expected to see movement in the different thresholds, a higher minimum threshold, regionally weighted categories or a reduction in % charged.

Our survey in July showed ‘reducing the % charged across all brackets’ was the most popular choice to update Stamp Duty, however this wouldn’t have tackled one of the key issues caused by Stamp Duty; the ‘stickiness’ of properties valued just into a new Stamp Duty threshold; by the old system a £500,000 house would incur a 3% charge but a £510,000 property would have a 4% rate applied so although the property would be valued correctly the jump into the next rate bracket was often off putting for buyers.

The changes announced in the Autumn Statement make the SDLT system more similar to the income tax system. The new Stamp Duty system, effective today (4th December 2014) means rather than the percentage being applied to the whole property value, the specified percentage is applied to each price increment. This will reduce the distorting effect the stamp duty brackets have on property prices around the thresholds and reduce barriers to moving to aid the flow of the UK property market.

Full details for Residential and non-residential stamp duty rates are provided by HMRC.

Property Purchase Price Rate of SDLT(percentage of portion of purchase price)
£0 – £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1.5 million 10%
Over £1.5 million 12%

If you are looking to buy a property find out what you will pay in stamp duty now and what you would have paid before using HM Revenue & Customs useful SDLT calculator.

Some examples;

  • £150,000 pay £500 (was £1,500) save £1,000
  • £250,000 pay £2,500 (was £2,500)
  • £350,000 pay £7,500 (was £10,500) save £3,000
  • £450,000 pay £12,500 (was £13,500) save £1,000
  • £550,000 pay £17,500 (was £22,000) save £4,500
  • £650,000 pay £22,500 (was £26,000) save £3,500
  • £750,000 pay £27,500 (was £30,000) save £2,500
  • £850,000 pay £32,500 (was £34,000) save £1,500
  • At £937,500 the tables turn and buyers above this level will see an increase in the stamp duty they pay.

What impact will the changes in Stamp Duty Land Tax have on the property market?Graham Tufnell, Manager at the Fleet Estate Agents Branch

These changes are live as of today. “Where contracts have been exchanged on or before 3 December 2014, and the transaction is completed on 4 December or later, you can choose whether you follow the new or the old rules.” HMRC.

“A long overdue reform and something that the NAEA have been pushing for some time, a fairer system that has been thought through and one which eliminates the impact for buyers and sellers around the threshold levels, a positive move for the housing market as we roll into 2015.” Graham Tufnell CPEA, Branch Manager, Fleet Office.Stephen Tetlow, Manager at the Hartley Whitney Estate Agents Branch

“The timing of the Chancellors changes to the Stamp Duty Land Tax could not have come at a better time as the benefits will coincide with what we anticipate to be a very healthy spring market for both buyers and sellers alike.” Stephen Tetlow, Sales Director.

”The stamp duty announcement is great news not just for buyers but for sellers too. Up until now, homeowners with properties valued just above the various stamp duty thresholds have found it extremely difficult to achieve the true value of their homes because of buyers’ reluctance toCrawford Moxley, Branch Manager - Ash Vale pay the additional tax incurred above the threshold.  In most cases this has led to vendors having to drop their price down to the threshold in order to entice buyers. In my view, the new rules on stamp duty should help overcome this issue for sellers.” Crawaford Moxley, Branch Manager, Ash Vale.

 

You may not know

  • ‘Stamp Duty’ was originally set up in the UK in 1694 as “An act for granting to their Majesties several duties upon vellum, parchment and paper, for four years, towards carrying on the war against France”**
  • In the 18th and 19th centuries the duties were applied to a variety of items such as newspapers, playing cards, dice, hats, perfumes, armorial bearings and insurance policies.
  • Attempting to enforce stamp duties in British colonies in 1765 may have contributed to the initiation of the American War of Independence.
  • ‘Stamp Duty’ was replaced by ‘Stamp Duty Land Tax’ in 2003 so is not longer a ‘stamp duty’ in it’s true form but a transfer tax charge.

 

*Rightmove Price Index Nov 2014: www.rightmove.co.uk/news/house-price-index/regional-trends-21 

** Dagnall, H. (1994) Creating a Good Impression: three hundred years of The Stamp Office and stamp duties.London: HMSO, p. 3. ISBN 011641418