Stamp Duty savings, but companies and high value owners beware

Author:

On Wednesday 3rd December, the Chancellor announced a complete reform of Stamp Duty (SDLT tax) in England & Wales – making it a graduated tax like income tax – and with effect from midnight that same day (i.e 4th December):

The rates of duty are now based on that respective part of the property price falling into the following bands:

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%

For example:

Under the old rates if you bought a house for £185,000, you would have had to pay 1% tax on the full amount – a total of £1,850. Under the new rates, for the same property you’ll pay nothing on the first £125,000 and 2% on the remaining £60,000. This works out as £1,200, a saving of £650.

BEWARE

  1. High value properties over £937,500 will actually pay more SDLT, whereas anything below this will either save or be no worse off.
  2. The Revenue were approached yesterday for comment on how the changes will affect the natural vs non-natural person bandings. The response:  'The separate, higher SDLT rate of 15% on interests in residential dwellings costing more than £500,000 purchased by corporate bodies/certain non-natural persons remains in place. Unless the property interest that is subject to the transaction qualifies for an exemption or exception from the separate higher rate, then to answer your question; this is a matter unaffected by today's announcement.'

WHAT IF YOU HAVE ALREADY EXCHANGED?

You have a choice between the old and new rates. We suspect you will want to choose whichever is the lower amount in total!

WHAT IF I HAVE JUST COMPLETED, BUT STAMP DUTY NOT PAID?

The old rules apply.

ONLINE CALCULATOR

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm

GOVERNMENT FACT SHEET

https://www.gov.uk/government/publications/stamp-duty-reforms-factsheet

WHY THE CHANGE?

Dramatic house price growth over the past year has rendered the stamp duty land tax (SDLT) bandings punitive, preventing first-time buyers from securing a foothold on the property ladder.

Lenders, estate agents and house builders alike have pressured on the Chancellor to address the stamp duty "jump" system which jumps from 1% to 3% at the £250,000.

The 3% / £250,000 threshold has not been changed since 2000, while reportedly property prices have increased in value by 139% in that time. This has stung first and second property movers in that bracket, making it harder for them to raise the deposit needed to secure the mortgage they require to get on or move up the property ladder.