This afternoon the Chancellor, George Osborne, announced a raft of new changes to the structure of Stamp Duty Land Tax (SDLT) in his Autumn Statement. As of midnight tonight, the rate at which purchasers pay tax will change from the former ‘slab’ structure which meant you paid the highest rate of stamp duty on the entire property price, to a new tiered system. The new format will mean that like income tax, each rate will only apply to the part of the property that falls within the tax band.
The changes to SDLT are as follows:
|The new tax rates are as follows:||The old tax rates were:|
|0% on £125,000||0% on £125,000|
|2% on any amount between £125,000 and £250,000||1% on properties up to £250,000|
|5% on any amount between £250,000 and £925,000||3% on propreties up to £500,000|
|10% on any amount between £925,000 and £1.5million||4% on properties up to £1million|
|12% on any amount over £1.5million||5% on properties up to £2million|
|7% on properties over £2million|
The Government estimates that the new changes will cut the tax bill for 98% of buyers. They also note that the property price tipping point at which buyers will start to pay more under the new system is £937,000, whereas those purchasing below this value, will likely save thousands.
So what does it mean for the London property market?
Lisa Mackenzie, Regional Sales Director at KFH, says: “The changes just announced to Stamp Duty Land Tax appear to be a much fairer way of charging. The new tiered system will be good news for many buyers within the London market looking for property up to £1,000,000. Taking away the smaller increments and making one large band between £250,000 and £925,000 will eliminate the stigma previously associated with certain price bands, especially those around £500,000. However the changes do penalise buyers looking in excess of £1,000,000 which will disproportionately affect the market in the Capital. We’re currently experiencing a flurry of interest from buyers keen to understand what the new rules will mean for them and in the majority, many appear to be slightly better off.”
When do they come into effect?
Although the changes will be effective from midnight on the 4th of December 2014, buyers who have exchanged contracts will be given the choice of using the newer measures or not.
Do these changes apply to both residential and commercial property?
No, these changes are only relevant to the residential property market and commercial property is still taxed in the same way as it was previously.
How will it directly affect me?
You’re buying a property priced at £300,000
You would previously have been charged £9,000 in SDLT
The new changes will now see you pay £5,000
This equates to a saving of £4,000 and a tax rate of just 1.7% of the purchase price
You're buying a property priced at £700,000
You would previously have been charged £28,000 in SDLT
The new changes will now see you pay £25,000
This equates to a saving of £3,000 and a tax rate of just 3.6% of the purchase price
You’re buying a property priced at £1million
You would previously have been charged £40,000 in SDLT
The new changes will now see you pay £43,750
This equates to an increase of £3,750 and a tax rate of 4.4% of the purchase price
For further information about the changes, you can visit the HM Treasury website here. HMRC has also produced an online calculator to assist you with understanding exactly what you’ll pay under the new rules.
Alternatively, you can also speak to one of our branches to find out how the new rules might affect you: https://www.kfh.co.uk/residential-properties/estate-agents/