Excite

Stamp duty reform outlined

The government obviously think that stamp duty is getting in the way of new house sales so they’ve altered it slightly to improve the market. The stamp duty reform that the chancellor’s autumn statement outlined will make a major difference to home owners across the land.
    wikimedia commons

What is stamp duty?

Before we go into the changes, let’s take a moment to have a look at stamp duty. Stamp duty land tax, which is its full name, is applied to all houses no matter whether you’re planning to live in the new property or rent it out. The old rules only charged a tax for properties over £125,000 and it was divided into five bands. Property sales worth between £125,001 and £250,000 were charged 1%. Sales of between £250,001 and £500,000 had a 3% tax applied. Properties that changed hands for between £500,001 and £1 million were charged 4% and homes worth between £1 million and £2 million attracted a 5% levy. Properties worth more than 2 million had a 7% tax attached. Homes registered to companies rather than individuals that cost more than £500,000 had a rate of 15%.

New system

The changes that went through in 2014 has introduced a new structure. There’s still no tax on properties worth up to £125,000 but you’ll now pay 2% for properties up to £250,000. The second band has changed so properties worth between £250,001 and £925,000 have a 5% rate and those costing between £925,001 and £1.5 million have a 10% rate. Anything above £1.5 million will attract a 12% tax rate.

Differences

Apart from the change in banding, the government has also made one other crucial change. Rather than applying the percentage to the whole property price, the new tax system doesn’t take the first £125,000 of the home’s value. It then taxes each part of the property’s price separately. For example a home worth £300,000 will attract a 2% tax on the portion higher than £125,000 but lower than £250,000. It then attracts a 5% rate on the balance of the property. In this scenario, a home owner would pay £5,000 tax. Under the old system, the property would have attracted a £9,000 tax charge.

United Kingdom - Excite Network Copyright ©1995 - 2017