Stamp Duty Land Tax, to give it it’s official title, has been seen as a perennial problem for homebuyers, and the housing industry has long lobbied for it to be overhauled.
Now, finally, it’s happened.
The old “slab” structure applied a stamp duty rate to the full property value which had the benefit of simplicity but created severe increases around the thresholds, the classic example being:
- Property valued £250,000 – stamp duty 1% = £2,500
- Property valued £251,000 – stamp duty 3% = £7,530
So what are the new stamp duty rates?
The new stamp duty regime replaces that structure with a marginal approach similar to income tax: the tax rate only applies to the amount within its designated band.
The new bands are:
- No tax on the first £125,000 paid
- 2% on the portion up to £250,000
- 5% on the portion up to £925,000
- 10% on the portion up to £1.5 million
- 12% on everything over that
What does this mean for homebuyers?
This is widely seen as a much more progressive approach and the Chancellor claimed 98% of house buyers would pay less tax under this regime.
Roughly speaking, it’s only properties above £1,000,000 that will incur higher stamp duty. And plotting that against Land Registry price paid data (green line, right hand axis) shows those are very few indeed.
For the vast majority of buyers, then, it’s going to be good news: a £275,000 home is now a massive £4,500 cheaper to buy, which surely makes everyone (except perhaps the tax man) happy.
What’s the catch?
Every silver lining needs a cloud, of course. There’s a risk of fuelling house prices further: we have to hope this doesn’t simply translate into asking prices going up £4,000 overnight. And by removing the incentive to come under thresholds it’s possible we may see properties selling for £260,000 that previously went for £250,000, and the wide 5% band probably gives scope for creeping rises.
That doesn’t seem a significant risk right now, but of course only time will tell.
The other issue is that it’s now a tad more complicated to work out how much stamp duty you’ll pay. Happily we’ve already updated our stamp duty calculator to do it all for you.
YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE