3rd December 2014
The Chancellor has announced sweeping changes to the stamp duty system, which he claims will mean 98% of home buyers pay less tax.
Speaking in his Autumn Statement today, George Osborne announced the removal of the controversial “slab” system of stamp duty from midnight tonight, which will cut the bill by £4,500 for a buyer purchasing a property worth £275,000. However experts warned that there would be a slowdown in property sales at the top end of the market where buyers will end up paying more tax.
Osborne said: “Today I am announcing a complete reform of a tax that has been described as one of our worst-designed and most damaging of all taxes.”
He explained that under the existing system, stamp duty is charged at a single slab rate on the whole purchase price of a home, so that large cost jumps apply when a house value tips into a new band.
Under the new system, higher rates of stamp duty will only apply incrementally, to the proportion of a property’s value that is above a given threshold rather than to the whole value.
Osborne pointed out that under the existing system, if you buy a property worth £250,000, you pay £2,500 in tax, whereas if you buy a house worth just one pound more and you pay over £7,500, three times as much.
Under the new system you would pay no tax on the first £125,000, followed by 2% on the portion up to £250,000, 5% on the portion up to £925,000, 10% on any portion up to £1.5 million and 12% on everything over that.
Osborne said: “If you buy an averagely priced home of £275,000, you will pay £4,500 less in tax.”
He added that anyone who has exchanged contracts but not completed by midnight will be able to choose whether to pay under the old system or the new, so “no one in the middle of moving house will lose out”.
HMRC has a stamp duty calculator so you can see how much you will have to pay under the new system.
Industry experts welcomed the move.
Paul Smee, director general of the Council of Mortgage Lenders said: “This fundamental reform has been a long time coming, but better late than never. Although there are losers as well as winners, the vast majority of mortgaged transactions will benefit from lower tax as a result of this move.”
Below are details of how the changes affect buyers different values of property:
Russell Quirk, chief executive of online estate agent eMoov.co.uk, said: “Although the reform sees an increased percentage paid on each price bracket the abolition of the slab structure means that those buying at the lower end of the market will save on the cost of stamp duty. In other words buyers will only pay the percentage levy on the proportion of the sale price at the new percentage rate.
“For the typical buyer at an average purchase price of £260k this is worth a lot and should definitely encourage buyers to buy and therefore sellers to sell.”