Stumped by new stamp duty land tax rules? If you thought the old system was confusing then don’t worry as the changes to the levy introduced by chancellor George Osborne last year actually make things a lot simpler.
So how does it all work in practice?
In the past if you bought a home for £250,000 you would pay £2,500 in stamp duty. As the rate was 1% of purchase price up to £250,000. That was simple enough, but if the price was even £1 more, you would pay an extra £5,000, as in £7,500 in total, as you would have to pay three per cent on the whole purchase price as soon as you go past the £250,000 threshold.
But this ‘slab’ approach has now been replaced with a new sliding scale system that makes life much easier for the average homebuyer and will give fluidity to the sale prices, as before the 250k mark was a major barrier for someone trying to sell their home for a little more.
With the new rules you pay nothing on the first £125,000 of a property’s value and then two per cent on the next £125,000.
On higher value properties, where there is a part worth £250,001 to £925,000, you pay five per cent on the amount within that range. This increases again to ten per cent on anything up to £1.5 million. After that it`s 12 per cent.
If the idea of paying less in stamp duty is making you think about buying a house or moving home, or you want to know how much purchase mortgages for home movers or first time buyers are through us give us a call or visit firstchoicefinance.co.uk.
If you buy a property for £275,000, you would pay £3,750 of stamp duty land tax. This is made up of absolutely nothing on the first £125,000, £2,500 on the next £125,000 and then £1,250 on the remaining £25,000.
It means in practice that 98 per cent of homebuyers in England and Wales should pay less and it’s only people who buy houses that are worth more than £937,000 who will pay more in tax.
For someone buying the average costing home in England it equates to a roughly 50 per cent cut in the tax paid.
It also irons out the sudden jumps between thresholds that used to make for a distorted property market as houses were artificially valued within a band.
Meanwhile from 1 April 2015, stamp duty in Scotland is being replaced by Land and Buildings Transaction Tax.
Under this scheme, anyone who buys a house priced below £324,280 will pay less than under the old system. If the home is valued above that, you’ll have to pay more in tax than you would have done in the past.
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