Stamp Duty Cut for most home buyers in the UK
Posted: Monday, January 19, 2015 by Richard Tuck
In December 2014 George Osbourne announced a complete overhaul of stamp duty land tax, which will see most homebuyers in Gloucester, Swindon and Worcester benefit from a reduced tax bill.
For example if you are buying a house at the national average price of £275,000 you will save £4500 compared with the previous system.
The Old Stamp Duty System
With the old system, stamp duty was tiered which meant that the tax increased in big jumps at certain price thresholds. For example at £250k the stamp duty rate increased from 1% to 3%. Putting this into monetary terms if you bought at £250k you would have paid £2500 tax, but if you purchased at £251k the tax increased to £7500!!
The problem was that it created a void between certain price ranges with transactions between £250k and £265k being almost non-existent. So it you owned say a four bedroom detached house worth £260k, the chances were that you would only actually achieve £250k for it.
The chart below shows how Stamp Duty effected house sales. You can clearly see the spikes and subsequent dips at £125k, £250k and £500k
The New Stamp Duty System
The Stamps Duty reforms which came into effect in December 2014 will cut tax for 98% of people buying a home. It is more complicated to work out than previous, but there are several Stamp Duty calculators available online which will work it out for you.
These rates are paid on the part of the property price within each tax band:
- 0% on the first £125,000 paid
- 2% on properties costing between £125,001 and £250,000
- 5% on properties costing between £250,001 and £925,000
- 10% on properties between £925,001 and £1,500,000
- 12% on properties costing £1,500,001 and over
The effective stamp duty rates graph shows that only those buying homes worth over £937,000 will pay more under the new system, everybody else will benefit from a saving.
This is great news for all buyers and sellers in the UK. To find out how Stamp Duty will effect you please feel free to contact Turtlehomes.co.uk online estate agents.