The Chancellor launched a salvo against Labour’s mansion tax plans in the Autumn Statement with the announcement that he planned a major overhaul of stamp duty on property purchases, introducing a progressive tax regime to replace the current punitive Stamp Duty Land Tax (SDLT) thresholds
The reform of stamp duty will mean a cut for 98% of people who pay it - only the highest value residential properties will pay more. The future stamp duty charge will be based on bands and will only be applied to the element that falls within a particular band.
‘Today I am announcing a complete reform of a tax that has been described as one of our worst-designed and most damaging of all taxes.
‘Stamp duty is charged at a single slab rate on the whole purchase price of a home. It means big jumps in tax when house values tip into a new band.
‘The distortions can be particularly damaging at the lower end.’
Under the current system, Osborne said, ‘if you buy a property worth £250,000, you pay £2,500 in tax. Buy a house worth just one pound more and you pay over £7,500, three times as much. And in recent years the burden of stamp duty has increased on low and middle income families trying to buy a new home, as prices have risen.
‘It’s time we fundamentally changed this badly-designed tax on aspiration.
‘So I am today abolishing the residential slab system altogether. In future each rate will only apply to the part of the property price that falls within that band – like income tax.
The new rates and thresholds, whereby SDLT will be charged at an apportioned rate, are:
- Transaction value up to £125,000 is charged at a rate of 0;
- £125,001-£250,000 at a rate of 2%;
- £250,001 - £925,000 at a rate of 5%;
- £925,001 - £1,500,000 at a rate of 10%; and
- Over £1,500,000 is charged at a rate of 12%.
These changes will take effect at midnight on 3 December 2014.
Examples of potential tax savings and increases under new SDLT rules
| Example properties | SDLT under old rules | Change in amount of tax paid | Change | Effective tax rate under new rules |
| Up to £125,000 | No stamp duty | No stamp duty | No stamp duty | No stamp duty |
| £185,000 | £1,850 | Saving: £650 | Saving: £650 | 0.70% |
| £275,000 | £8,250 | Saving: £4,500 | Saving: £4,500 | 1.40% |
| £510,000 | £20,400 | Saving: £4,900 | Saving: £4,900 | 3.00% |
| £937,500 | £37,500 | No change | No change | 4.00% |
| £2.1m | £147,000 | Increase: £18,750 | Increase: £18,750 | 7.90% |
Source: Treasury
'Anyone who has exchanged contracts but not completed by midnight will be able to choose whether to pay under the old system or the new, so no one in the middle of moving house will lose out.'
‘Today I’m cutting stamp duty for millions,’ said Osborne. ‘Under the old rules, you would have paid Stamp Duty Land Tax at a single rate on the entire property price. Now, you will only pay the rate of tax on the part of the property price within each tax band – like income tax.’
This means that for a house purchase at £185,000, there will be no SDLT on the first £125,000 and 2% on the remaining £60,000. This works out as £1,200, a saving of £650. Stamp duty on a £5m pound house will rise from £350,000 to £514,000.
The changes to stamp duty will cost the Treasury up to £3.6bn over the next six years, according to the Autumn Statement. It projects costs of £395m in 2014-15, rising to £760m in 2015-16, £840m in 2016-17 and then settling around the £850m mark thereafter.
Scottish homebuyers will be able to use the same system until the introduction of the new Scottish land tax in April 2015.
Use the HMRC online calculator to find out how much you will pay http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
Download the Treasury fact sheet on new SLDT rates here https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382324/Stamp_Duty_15.pdf