Last week, George Osbourne surprised us all by creating a huge shake-up to the way Stamp Duty works in the UK. As an estate agent I have been lobbying for a change in the stamp duty rules for some time so we’re thrilled about the changes.
However, this pesky property tax can be a confusing subject (even for us estate agents), so here is our guide to understanding the changes.
For the vast majority of home buyers in Bishops Stortford (around 98% of us) the changes are great news because if you’re buying a property under £937,500 you will be paying considerably less tax than you would have done under the old rules.
So what are the new rules?
The stamp duty land tax you pay is now set in chunks rather than on the whole value of the property. Here are the rates released by HMRC that details how much tax you pay in each chunk.
£0-£125,000
0% (Chunk 1)
£125,001-£250,000
2% (Chunk 2)
£250,001-£925,000
5% (Chunk 3)
£925,001-£1,500,000
10% (Chunk 4)
£1,500,001 and over
12% (Chunk 5)
Stamp duty now works in much the same way as income tax.
You will no longer pay a flat % based on the final selling price
Buyers purchasing properties under £125,000 still won’t have to pay stamp duty at all
The percentage of tax you pay will change as you go up the scale
You won’t pay any stamp duty on the first £125,000 of the value of your property, just like your income tax allowance.
Properties over £1million will see an increase in stamp duty
Here’s an example for you:
If you purchase a property at £185,000 under the old rules you would have to pay 1% tax on the whole price, that’s £1,850. Under the new rules, you don’t have to pay a penny for the first £125,000 of the property value and you pay 2% on the remaining £60,000, which is £1,200. Much cheaper!
For more information and help working out what stamp duty you owe on a new property, check out HMRC’s calculator. http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
The advantages
The great thing is that properties between about £250k and £925k can save thousands of pounds using the new system, so if you’ve been thinking about moving home but have been put off by high moving costs then there’s no better time than to reconsider now. This is particularly good news in Bishop’s Stortford as the average asking price has now reached a whopping £425,000.
Apart from the obvious cost saving when moving home there are some other advantages too. No longer will properties struggle to sell when priced just above a stamp duty band change. For example a property valued at £260,000 would achieve far less interest than one priced at £250,000 simply because there was a huge jump in stamp duty. This ‘slab’ style tax was ineffective and often meant properties were sold for under their value due to the old stamp duty structure.
Adam McHenry is a Director at Cadman Homes. Cadman Homes are a family owned and run estate agents in Rugby specialising in residential property. We pride ourselves on not only giving a “red carpet” service to house sellers, buyers, landlords and tenants in the Rugby area, but also our 24/7 phoneline and out of hours service. If you are looking to move and want to speak to a trustworthy and reliable estate agent in the Rugby area then call 01788 560 905 or request a call back on this website!