Big news for UK homebuyers today with the reform of Stamp Duty Land Tax taking effect tomorrow.
Chancellor of the Exchequer, George Osborne, has today announced a reform of how stamp duty land tax (SDLT) is calculated for residential property purchases which complete on or after 4 December 2014.
Stamp Duty Land Tax is payable if you buy a property in the UK over a certain price and is charged on all purchases of houses, flats and other land and buildings.
In Suffolk, the average house price is £168,765. Under the current calculation, the tax due on completion would be £1687. From tomorrow, that reduces to just £875 – a very pleasing reduction of £812!
Before 4 December 2014, SDLT was charged as a single percentage of the property price.
From 4 December, rather than a single rate of tax being charged, each new SDLT rate will only be payable on the portion of the property value which falls within each band.
Taking the average house price in England & Wales for October 2014 of £177,377 as an example, the SDLT due under the current calculation would be £1,773. Under the new calculation, the SDLT is £1,047 – that’s £726 less.
Many of our clients buy within the Eastern region, where the average house price of £198,338 sees a reduction of SDLT of £517 from £1,983 to £1,466.
A quick calculation of SDLT savings for average house prices in other counties in the region results in reductions of:
- £474 for Cambridgshire‘s average house price of £202,583 – SDLT going from £2,025 to £1,551
- £937 for Norfolk‘s average price of £156,345, with the tax reducing from £1,563 to only £626
- £399 for Essex, where the higher average price of £210,097 sees the amount payable drop from £2,100 to £1,701.
Where contracts have been exchanged before 4 December but complete on or after that date, the purchaser can choose whether to pay tax under the old or the new rules.
To see what effect the new rules have on your property price, use the HM Revenue and Customs SDLT calculators.
According to the government, SDLT will be cut for 98% of people who pay it, and all those purchasing a property for less than £937,500 will pay less or the same SDLT under the new rules.
Whether you’re buying or selling our specialist lawyers can help.
Average house prices are taken from Land Registry’s House Price Index statistical report for October 2014: https://www.gov.uk/government/statistical-data-sets/house-price-index-statistical-report
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