Most homebuyers will pay less stamp duty after Chancellor George Osborne changed the tax rules in his Autumn Statement.
From December 4, 2014, the old method of calculating stamp duty is scrapped for all homebuyers – including property investors.
Instead of paying a percentage of the purchase price for any property valued at more than £125,000, new rules are coming in that smooth the rate bands.
One of the complaints about stamp duty was if a home price changed by just £1, the percentage of tax charged changed significantly.
The stamp duty threshold still sticks at £125,000 – for properties valued up to that price; the rate is zero, however:
- For properties priced from £125,001 to £250,000 the rate is 2%
- For properties priced from £250,001 to £925,000 the rate is 5%
- For properties priced from £925,001 to £1,500,000 the rate is 10%
- For properties priced over £1,500,000 the rate is 15%
For the average family home costing £275,000, tax paid under the old calculation would have been £8,250, but under the new rules drops to £3,750.
Now, nothing is paid on the first £125,000, 2% tax is paid on the value between £125,001 and £250,000 and 5% on the remaining £25,000.
Homebuyers who have exchanged contracts but not completed on December 4, 2014 can opt for paying stamp duty under the old or new rules.
Anyone exchanging and completing on or after December 4, 2014, pays under the new rules.
“In recent years the burden of stamp duty has increased on low and middle income families trying to buy a new home, as prices have risen,” said Osborne
“This makes it even more difficult to get together the cash deposits buyers need.
“It’s time we fundamentally changed this badly-designed tax on aspiration.
“So I am today abolishing the residential slab system altogether. In future each rate will only apply to the part of the property price that falls within that band – like income tax.
” As a result stamp duty will be cut for the 98% of homebuyers who pay it.”