The recent Autumn Statement announced some big news with regards to Stamp Duty Land Tax charges which will have a positive effect for most buyers.
Before December 4th Stamp Duty Land Tax was calculated as a percentage of the whole property price and this percentage went up depending on the value of the property. For example, properties over £125K levied a 1% charge, over £250K levied a 3% charge, over £500K was 4%, over £1 million was 5% and over £2 million was 7%.
The changes to Stamp Duty Land Tax have been quite radical and, similar to income tax, Stamp Duty Land Tax is now being levied on a ratio scale for each part of the property price that falls within each particular band.
To clarify, from the 4th December these are the rules:
No Stamp Duty Land Tax is charged for the first £125K of the property value
2% to be paid on the portion up to £250K
5% to be paid on the portion up to £925K
10% to be paid on the portion up to £1.5m
12% to be paid on anything above
For example if you purchase a property for £350,000 under the old scheme you would have paid £10,500 and under the new scheme you will pay £7,500
What took everybody by surprise was how quickly the change has been brought in and for those people who were in the middle of house purchases it resulted in a lot of calculator thumping to decide which system worked best for them for the day after the new rules came into effect.
For anybody who was due to complete on the day after the changes came into force, they were given the option of whether to use the old or new system for one day only. Unfortunately if you had already just completed then that particular boat had sailed.
Most people have welcomed the change and it should have a positive impact on people being more willing and having the means to move up the housing ladder. Of course, at the upper end of the scale there is some consternation about the changes as it will cost more in Stamp Duty Land Tax than previously, but that is only to be expected when a policy change happens; there are always winners and losers.