03 Mar Stamp duty land tax reforms
Big changes to the way Stamp Duty Land Tax (SDLT) is calculated for residential properties came into effect in December 2014. The changes were intended to benefit buyers of all but the most expensive properties in the UK. Scotland was included in the changes until the SDLT in Scotland was replaced by the devolved Land and Buildings Transaction Tax system on 1 April 2015.
HM Treasury has published an interesting press release that shows that over 780,000 homebuyers have saved an estimated £657 million since the changes were introduced. Prior to the change, SDLT was charged on the slab basis: whatever rate applied to the total value of the property was applied to the entire purchase price. So if your purchase was £275,000 you would have paid a 3% charge on the total price, £8,250. The new rates are applied on a graduated basis, like Income Tax. In the above example, the SDLT charged now for a property purchase of £275,000 would be £3,750, a saving of £4,500.
Some of the savings highlighted in the report were as follows:
- £24 million in the North East or £900 for the average house
- £90 million in the North West or £700 for the average house
- £74 million in the East Midlands or £500 for the average house
- £131 million the South West or £4,800 for the average house
- £38 million in Wales or £800 for the average house
The Chancellor George Osborne said:
'These figures show that the benefits are being felt across the country. ‘It’s a fair, workable, lasting reform to the taxation of housing. I am determined that this government will continue to take bold action to support a home-owning democracy.'
The report has also highlighted the fact that transactions at the top end of the market remained constant under the new regime and stamp duty receipts from homes costing more than £1 million went up by 15% across the year.
A new higher SDLT rate, 3% higher than the current SDLT will apply to the purchase of most additional residential properties such as buy to let and second homes from April 2016. The higher rates will apply in England, Wales and Northern Ireland.