Mr Osborne said 98% of people in England and Wales will now pay less duty when buying a property. Only those buying homes worth more than £937,000 will be worse off.
The changes, which came into effect on Dec 4, introduced more gradual increases in stamp duty rates. Under the previous system, the duty had been criticised for being what was described as a slab tax, meaning it suddenly jumped by large amounts between the different thresholds.
This meant that someone buying a home for £250,000 would pay a 1% stamp duty of £2,500. However, if the property went over the £250,000 threshold, even by only £1, then the rate would jump to 3%.
This 3% would apply to the whole purchase price meaning that the buyer would have to pay an extra £5,000, simply because of that £1 extra on the purchase price.
The new system is more progressive. The rates of stamp duty only apply to the amount of the purchase price that falls within each band.
This means that a person buying a house for £200,000 will pay nothing on the first £125,000, as that is zero rated. They will then pay 2% on the next £75,000, making a total tax bill of £1,500. Under the previous system they would have paid 1% on the total purchase price, providing them with a bill of £2,000.
The new system therefore saves them £500.
The new rates are:
- Up to £125,000 : 0%
- £125,001 to £250,000 : 2%
- £250,001 to £925,000 : 5%
- £925,001 to £1.5m : 10%
- Above £1.5m : 12%.
Solicitors and estate agents have already reported increased activity in the housing market. Haart’s estate agency has seen a 15% increase in inquiries about properties since the stamp duty changes came into effect. Russell Jervis, Haart’s managing director, said: “The change has generated new sales – there were people who suddenly could increase their offer and several new sales were agreed straight away.”
There are concerns, however, that the changes could lead to an increase in house prices.
Please contact Jo Ayrton or Sarah Gratton in our Warminster office on 01985 214444, or Sandra Smith and Ian Rhodes in Westbury on 01373 865577 or email firstname.lastname@example.org if you would like more information about the issues raised in this article or any aspect of buying and selling a home.