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Changes To Stamp Duty

Adam Swalwell from Carver Financial Services explains the changes in Stamp Duty and how it will affect buyers

  • 11 December 2014
  • Author: Emma Wright
  • Number of views: 1217
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As with any Government statement, there were a few surprises in George Osbourne’s Autumn Statement yesterday – and not least was the reformation of Stamp Duty as we know it.

In what was his last statement before the General Election, Osbourne announced that there is to be a complete overhaul of the system.

What is Stamp Duty? Introduced in 2003, Stamp Duty Land Tax (SDLT) is a transfer tax charged when purchasing a property.

What is the old system and why change it? The old way of calculating Stamp Duty was by using what was known as a ‘slab system’. It would begin when a homebuyer purchases a property over £125,000. Any properties bought for up to £250,000 would then be charged at 1 per cent.

The stamp duty charges then rose to 3 per cent for properties worth more than £250,000 up to £500,000, and continued to rise to 4 per cent up to £1m, 5 per cent up to £2m and 7 per cent over £2m.

The problem with this system was that, if a buyer paid just one penny over the £250,000 threshold, they would be charged triple the amount of Stamp Duty than if they were a penny under it.

So, what’s changed? Under the new system, the amount of Stamp Duty owed will work in a graduated way, much like income tax.

Properties worth up to £125,000 will continue to be Stamp Duty-free and this will gradually increase to 2 per cent as the value increases to £250,000, to 5 per cent to £925,000, to 10 per cent to £1.5m and to 12 per cent for everything over.

Will this affect everyone? Yes. The new rules will save 98 per cent of homebuyers, potentially, thousands of pounds. However, homes that cost their buyers over approximately £937,000 may see their Stamp Duty increase.

The new thresholds mean that when purchasing the average family home of £275,000, a buyer will save £4,500.

The changes affect the whole of the UK until April, which is when the Scottish parliament plan on revealing their own tax reforms.

How much will I pay? With any introduction or change in the housing industry, it is advised that you speak to professional independent mortgage adviser to discuss how they could affect you in your specific circumstances.

 

Property Purchase Price Band Rate of Stamp Duty
£0 – £125,000 0%
£125,001 – £250,000 Up to 2%
£250,001 – £925,000 Up to 5%
£925,001 – £1.5 million Up to 10%
Over £1.5 million Up to 12%

 

Adam Swalwell is from Carver Financial Services – for further information call: 07872 822720

Email: adams@carvergroup.co.uk or visit: www.carvergroup.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice.  The actual amount you pay will depend upon your circumstances.  The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed. 

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