UK Stamp Duty reform could save £200m

  • 10 years ago
  • Uncategorized
Last week, George Osborne announced a complete reform of the UK Stamp Duty system during the 2014 Autumn Statement.
The old system, which categorised sales into slabs based on the total view of the property, has been replaced by a banded approach, not unlike income tax, which will calculate charges based on progressive thresholds.
Previously, if you bought a property worth £250,000, you would have paid £2,500 in tax – and, if you bought a house worth just one pound more, you would have paid over £7,500, three times as much. 
Indeed, in an analysis of property sales in the twelve months to May 2014, Zoopla found that 28,635 properties had been under-priced in order to make them more appealing to buyers – by avoiding steep jumps in stamp duty. 
The portal found that the number of property sales in the price bands immediately before an existing stamp duty threshold was significantly higher than expected, while the number of sales in the price band immediately after a threshold – the stamp duty “dead-zone” – was considerably lower. 
The new rules came into effect on Thursday 4th December, meaning that buyers could start to save on transaction costs immediately.
Buyers will pay no tax on the first £125,000 paid, then 2% on the portion up to £250,000, 5% up to £925,000, 10% up to £1.5 million and 12% on everything over that.
Sellers, meanwhile, will be able to price their properties accurately, potentially saving £213m a year – to the tune of almost £7,500 each.
Lawrence Hall of Zoopla says the new, graduated Stamp Duty system is a “long overdue overhaul to what the Chancellor admitted was a poorly-designed tax” and represents a “fairer system for the vast majority of homebuyers”.
“It also means that those selling their home at certain levels are more likely to achieve the real value of their homes and won’t be forced to discount their properties to sneak under certain bands,” he added.
“Unfortunately those buying property worth more than £937,000 may feel unduly penalised by the new reforms, but the new structure represents a more balanced system overall and a welcome alternative to the ‘mansion tax’ plans that had been proposed.”

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