Posted on December 6th, 2014 | Categories - Mortgages
Following Wednesday’s Autumn Statement the squabbling between the main political parties and the media over how the deficit will be attacked has diverted attention away from the Chancellor’s main giveaway; a major reform to how Stamp Duty on residential property purchases is calculated.
The Stamp Duty changes are perhaps the largest change to your personal finances in the Autumn Statement and will certainly affect you if you are planning to buy or sell a residential property.
So what’s changed? Let’s start by looking at what are now the ‘old’ Stamp Duty rules.
How was Stamp Duty calculated under the ‘old’ rules?
Until Wednesday’s announcement Stamp Duty was calculated as a percentage of the total amount you were paying for the property.
The rates were as follows:
- Up to £125,000 Zero
- Over £125,000 to £250,000 1%
- Over £250,000 to £500,000 3%
- Over £500,000 to £1 million 4%
- Over £1 million to £2 million 5%
- Over £2 million 7%
So, if you were to buy a house for £300,000 to tax bill would be 3% of that amount, i.e. £9,000, whereas a purchase price of £150,000 would land you with a bill of £1,500.
And how will it work now?
Mr Osborne believes the current system is unfair and has announced major changes. The new rates, which applied from midnight on Thursday 4th December, will now be calculated on different tiers, rather than the total value of the property you buy.
The new tiers are:
- 0% on the first £125,000 of the purchase price
- 2% on the amount up to £250,000
- 5% on the next £925,000
- 10% on the next £1,500,000
- 12% thereafter
Therefore someone buying a house for £300,000 will now pay £5,000; a reduction of £4,000. Whereas someone buying for £150,000 will now pay £500; a saving of £1,000.
The Chancellor announced that “98% of home buyers” would pay less Stamp Duty under the new rules, with only those people buying expensive properties paying more.
Indeed initial calculations show that anyone buying a home for under £937,500 will pay less stamp duty under the new rules than would have previously been the case.