As a bit of a Leftie I had to, reluctantly, take my hat off to George Osborne this week with the change in Stamp Duty rules. Clearly a clever move politically but also something that has needed to be done for some time. Recently the Council of Mortgage Lenders wrote to the chancellor asking him to look at reforming stamp duty, still it was a big surprise when it was announced.
So what has changed? Essentially the old system charged a flat rate based on the full purchase price of the property, now the system is tiered with different rates charged on just that portion of the purchase price, much like income tax. On the face of it the system does seem much fairer (if you think that stamp duty is a fair tax).
The new rates are as follows:
|Purchase price of property||Rate of SDLT (on the portions only)|
|£0 – £125,000||0%|
|£125,001 – £250,000||2%|
|£250,001 – £925,000||5%|
|£925,001 – £1.5 million||10%|
|Over £1.5 million||12%|
So for a purchase price of £350,000 your previous bill was £10,500 and now it will be £7,500. For those in the market for £1m+ properties then their bill will increase. The Chancellor gave the figure of 98% of transactions would benefit from a lower bill.
Time will tell of the effects this will have on the property market. I think the obvious change will be that those with properties sitting around the £250,000 and £500,000 mark, could previously expect the property value to sit at that level with buyers unwilling to pay extra stamp duty, should benefit. By benefit I mean that it will be a correcting of the market so a property valued at £260,000 probably won’t get bartered down to £250,000 to avoid the extra stamp duty.
I’m not sure the changes will lead to a big increase in house sales volume, for that to happen I think the lower threshold needed to go up significantly. The savings might mean that first time buyers are encouraged to get on the property ladder as the savings they need to build up (or draw from the bank of Mum and Dad) will not need to be as much. Generally speaking though I think the impact on prices and volume will be minimal. My opinion is that the savings will be used by buyers to either reduce their borrowing or spend on new stuff for their new house. The knock on effect of this is that the spending comes into the economy and fuels further growth, so more good news.
If you are about to embark on a purchase then use this link to work out what your stamp duty bill will be. http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm