Will the stamp duty reformation have an impact on your property buying habits?

As with any government statement, there were a few surprises in George Osborne’s Autumn Statement, and not least was the reformation of stamp duty as we know it. In what was his last statement before the general election, Osborne announced that there is to be a complete overhaul of the system. Here the UK’s leading independent mortgage broker, Mortgage Advice Bureau, explores the changes in stamp duty and how it will affect buyers across the nation. Introduced in 2003, Stamp Duty Land Tax (SDLT) is a transfer tax charged when purchasing a property. The old way of calculating stamp duty was by using what was known as a ‘slab system’. It would begin when a homebuyer purchases a property valued over £125,000. Any properties bought for up to £250,000 would then be charged at 1%. The stamp duty charges then rose to 3% for properties worth more than £250,000 and up to £500,000, and continued to rise to 4% up to £1million, 5% up to £2million and 7% over £2million. “The problem with this system was that, if a buyer paid just one penny over the £250,000 threshold, they would be charged triple the amount of stamp duty than if they were a penny under,” said Oliver Adair from Mortgage Advice Bureau. So what’s changed? Under the new system, the amount of stamp duty owed will work in a tiered way, much like income tax. For example, if you bought a property worth £130,000, you would pay £100 stamp duty as you are only paying 2% on the £5,000 over the stamp duty free threshold of £125,000. If you bought a property worth £255,000, you would still pay the 2% stamp duty on the £250,000 as it is still in the 2% bandwidth of £125,001-£250,000. This purchase would equate to £2,500 in stamp duty charges. Oliver added, “The new rules will undoubtedly affect all buyers. In fact, 98% of homebuyers could potentially save thousands of pounds when purchasing a property. However, homes that cost over approximately £937,000 may see their stamp duty increase.” The new thresholds mean that when purchasing the average family home of £275,000, a buyer will save £4,500. The changes affect the whole of the UK until April, which is when the Scottish parliament unveil their own tax reforms. “With any introduction or change in the housing industry, it is advised that you speak to professional independent mortgage adviser to discuss how you will be affected,” concluded Oliver. For further information please contact Oliver on 07917 146430 or email olivera@mab.org.uk. Alternatively, please visit www.dawsonsproperty.co.uk
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