In his Autumn Statement the Chancellor, George Osborne, announced that from midnight on 3rd December the way in which Stamp Duty is charged has changed.
Previously, Stamp Duty was charged at successively higher rates on the whole purchase price and had been called a ‘slab tax’ because of this. So, if you had bought a property for £250,000, you would have paid 1% Stamp Duty, but if you paid only £1 more on the purchase price you would have paid 3% on the purchase price, which is an extra £2,500 in tax.
As of 3 December, it's now more like Income Tax, so the tax now rises progressively, and you will only pay tax on the amount of the purchase price that falls within the tax bracket. So, if you buy a house for £200,000, you will pay no Stamp Duty on the first £125,000 and then 2% on the next £75,000. This will mean a lower tax bill for most people.
The new rates are as follows:
The Government has said that anyone buying a property for less than £937,500 will now either pay less tax or the same amount of tax under the new rules.
In Scotland things are changing too. From April 2015 Stamp Duty is being replaced by Land and Building Transaction Tax (LBTT). There will be a tax-free allowance of £135,000. Then there are three bands:
With a house sold for £300,000, the first £135,000 would be tax free, then the next £114,999 would be subject to 2% tax and the rest would be subject to 10% tax. If you're buying a property under £325,000, you would be better off, but if you were buying a property higher than this price then you would be worse off under the new system.
Published on: December 5, 2014