2014: Stamp Duty Land Tax Reforms

Key points from the Chancellor's Autumn Statement 2014:

Following the proposals put forward in Scotland for the new progressive “Land and Building Transaction Tax” which will replace Stamp Duty Land Tax north of the border, it is no surprise that the Chancellor has introduced a similar system for residential properties in England.

Under the current “slab” system, once a purchase price exceeds a threshold, tax is charged at the applicable rate on the whole price. Under the new system, SDLT will be charged in a similar way to Income Tax on a progressive basis with slices of the purchase price being taxed at different rates.

The new rates of Stamp Duty Land Tax will be:

Purchase price of the property £	New rate on band
0 – 125,000	0%
125,001 – 250,000	2%
250,001 – 925,000	5%
925,001 – 1,500,000	10%
1,500,000 and over	12%

This means that for the majority of property purchases the amount of Stamp Duty payable will fall

Example properties	Tax paid under the old rules	Tax paid under the new rules	Change in amount of tax paid	Effective rate of tax paid
£125,000 – no stamp duty	£0	£0	£0	0%
£185,000 – Average Help-to-Buy home	£1,850	£1,200	-£650	0.7%
£275,000 – Average family home	£8,250	£3,750	-£4,500	1.4%
£510,000 – Average London home	£20,400	£15,500	-£4,900	3%
£937,500 – no change in stamp duty	£37,500	£37,500	£0	4%
£2,100,000 – increase in stamp duty	£147,000	£165,750	£18,750	7.9%

This is a very welcome change that will remove some of the distortions in the residential property market and allow property values to find their “real” level without the effect of tax dragging down values at the old thresholds.

If you had exchanged contracts but not completed by 3 December you will be able to choose whether to use the new or old rules. for more information or to discuss anything in more details, please contact Andrew Grant.