In the Autumn Statement 2014,George Osborne made a surprise announcement: stamp duty rules would be changed, benefiting up to 98% of homebuyers in the UK.
Under the new rules, which have come into immediate effect, stamp duty is no longer paid at a flat rate. Instead, the amount of duty paid on a property purchase increases incrementally, so that for the first £125,000, you pay nothing; on the next £125,000, you pay 2%; and on the remainder of a property costing up to £925,000, you pay 5%.
For the proportion of the price that is over £925,000, 10% stamp duty is due, with 12% payable over £1,500,000.
Previously, if you were buying a property at £249,000, for example, you would pay 1% of the whole purchase price to the Government, with this jumping to 3% of the total price once the price crossed the £250,000 threshold. This huge jump caused problems in the market, with people being unwilling to break that £250,000 barrier in particular due to thousands of extra pounds being lumped on to the property purchase bill.
Now, instead of paying £7,500 in stamp duty on a purchase of £250,000, thanks to the tax relief on the first £125,000, a buyer will pay just £2,500, proving a tidy saving in what is often one of the most expensive transactions of one’s life.
The changes are set to please property sellers as well, who should be able to achieve sale prices of more than a quarter of a million more readily, thanks to the reforms.
It’s not all good news, however; for those buying at the pricier end of the market, the new law could prove costly. For those purchasing a property at £1 million, for example, the rate of stamp duty has jumped from 4% on the whole price to 5% on the proportion between £250,000 and £925,000 and 10% on the remainder, with these charges rising still further for multi-million-pound homes.
Nonetheless, it’s predicted that stamp duty reforms could improve house sale statistics by up to 5% over the next year, offering a much-needed boost as the post-credit crunch property price surge was just beginning to cool.
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