Has Christmas come early for home buyers?
‘Tis the season of super savings and after the frenzied sales of Black Friday and Cyber Monday, the government this week unveiled the new Stamp Duty reforms which will see 98% of buyers saving money on their new homes.
What is Stamp Duty Land Tax?
Stamp Duty is the tax paid on all transactions involving property sales and is calculated as a percentage of the purchase price of the property.
Old Stamp Duty rates
Before the new reforms, Stamp Duty was charged at single rate on the entire property. If the property price crept over the threshold tax was paid on the whole of the purchase price.
- Purchase Price Old Stamp Duty Rate
- £0 - £125,000 0%
- £125,001 - £250,000 1%
- £250,001 - £500,000 3%
- £500,001 - £1 million 4%
- Over £1 million - £2 million 5%
- Over £2 million 7%
New Stamp Duty rates
The new Stamp Duty rates are based on a graduated tax band system, similar to the way income tax is calculated, with a percentage being applied only to the amount falling within each band.
For example on the purchase of a property for £185,000: £125,000 will be tax free and the remaining £60,000 will be taxed at 2%.This means £1,200 Stamp Duty is due a saving of £650 compared to the previous regime.
- Purchase Price New Stamp Duty Rate
- £0 - £125,000 0%
- £125,001 - £250,000 2%
- £250,001 - £925,000 5%
- £925,001 - £1,500,000 10%
- £1,500,001 and Over 12%
The new rates only apply to residential properties. Commercial properties will continue to be taxed under the old commercial rates.
What does this mean for new buyers?
Many of our clients are already feeling the savings; one said she was “ecstatic about the saving” of £4,200 on the Stamp Duty she received on her recent property purchase. Another client purchasing a property for £145,000 found their Stamp Duty bill going from £1,450 down to £400.
When do the new rates apply?
The new rates came into force at midnight on 3rd December 2014.
Why would you wish to use the old rates?
While the majority of new owners will be receiving a significant saving I’m afraid it’s the proverbial “Coal for Christmas” for homes purchased at over £937,500.00
Properties selling for £1 million see a Stamp Duty increase of £3,750 and a property purchased for £2 million incurs an additional £53,750 in tax.
These changes saw solicitors frantically trying to exchange contracts for properties that would see a significant tax increase to ensure clients could benefit from the old stamp duty rates!Return to the insights archive »
The content on our site is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up-to-date.