In his Autumn Statement yesterday (3 December 2014), Chancellor George Osborne announced changes to the Stamp Duty thresholds. These changes come into effect from 4 December and it is good news for most home buyers.
The key change is that the property sale price is broken up into the different rate bands, rather than paying the rate on the whole amount as was the case with the old system. If you are buying a property for under £937,500 then the amount of Stamp Duty you are required to pay has fallen.
The new bands are:
- Up to £125,000 0%
- £125,000-250,000 2%
- £250,000-925,000 5%
- £925,000 – £1.5m 10%
- £1.5m+ 12%
For example, here are the changes on a property purchased for £280,000:
Old system: The rate for properties between £250,000 and £500,000 was 3%. You would have to pay 3% on the whole amount, leaving a Stamp Duty payable of £8,400.
New system: There is no Stamp Duty on the first £125,000; on £125,000-250,000 the rate is 2% and £250,000-925,000 has a rate of 5%. The amount to be paid is £0 + £2,500 + £1,500 = £4,000. A saving of £4,400, or a decrease of 52.3%.
To calculate how much Stamp Duty you may need to pay, HMRC have an updated calculator on their website.
These rates are applicable in Scotland until the 1 April 2015. From this date Stamp Duty will be replaced with the new Land and Buildings Transaction Tax. We will be detailing the implications of this change closer to the time.