At last, this outdated and bizarre “slab” tax structure has been overhauled by the Chancellor in yesterday’s Autumn Statement.
Previously,when you purchased a residential property you would have been subjected to Stamp Duty Land Tax (SDLT) at 1% on the entire purchase price if it was between £125,000 and £250,000, at 3% on properties priced at £250,001 to £500,000 and 4% if the price was over £500,000. More hefty rates apply once you are dealing in properties over £1m.
Today (4th December 2014), we have a banded tax structure more akin to income tax.
Up to £125,000 the SDLT the rate is still 0% but then buyers will pay at 2% on the portion up to £250,000. The value above £250,000 and below £925,000 will attract 5%, then 10% up to £1.5m and 12% over that.
Simply put, when buying your first home or even a modest family home, this change wont have much impact financially, but exceed the current £250,000 threshold and the savings can be substantial. Buy yourself a mansion and you’ll be wondering why you didn’t do it yesterday!
George Osborne claims that 98% of buyers will pay less under the new structure.
A bigger impact in the future?
For me, this change is not just about updating the tax system and helping the average home owner, this is a fundamental shift that I think will have a major impact on the property market.
Until now, there has been a false ceiling price because a buyer offering to pay £250,001 would pay £5,000 more SDLT than someone offering £249,999.
Without this ridiculous slab tax system, more freedom to offer a true market price will prevail. The true forces of supply and demand can start to work their magic and those who wish to develop their family home currently worth around £240k can do so knowing that they don’t have to cap their potential payback at £250k.
Hallelujah for common sense; not something I can say very often when talking about tax!
Paul Broadhead, head of mortgage policy at the Building Societies Association agrees that it will “smooth out the crazy tax jumps buyers have suffered around the top of each band”
The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.
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