Oliver Knight of Knight and Rennie in Leamington says it is great news for buyers and sellers that the unfairly applied and unpopular stamp duty tax is finally being reformed.
The reform of Stamp Duty is largely regarded as being long overdue and with it, is anticipated a shot in the arm for the residential sales market.
George Osborne stated to MPs: “It is time we changed this badly designed tax on aspiration” and he believes that 98 per cent of homeowners in England and Wales would pay less than they did under the old system.”
Only those people who buy homes worth more than £937,000 will pay more in tax.
Previously Stamp Duty charged successively higher rates on the whole of the purchase price. These slab rates have been much criticised as its structure meant that there were sudden increases in Stamp Duty when the price went above the next threshold.
For example, someone buying a home for £250,000 would pay £2,500 or one per cent in Stamp Duty, but if the price was £1 more, they would pay an extra £5,000 as they then paid three per cent of the whole transaction.
Now the new rates of Stamp Duty only apply to the amount of the purchase price that falls within the particular duty band, making it more like income tax.
In other words, someone buying a house for £300,000 will pay nothing on the first £125,000, then two per cent on the next £125,000 and five per cent on the balance between £250,000 and the purchase price. Previously they would have paid three per cent on the whole £300,000 equating to £9,000, now this is dramatically reduced to £5,000.
The new rates are: Up to £125,000 - 0%; £125,001 to £250,000 - 2%; £250,001 to 925,000 - 5%; £925,001 to £1.5m - 10%; Above £1.5m - 12%
Anyone buying a family home for an average price in England and Wales now pays £4,500 less in Stamp Duty. The new system also smooths out the steps or sudden jumps in the old style Stamp Duty thresholds.