George Osborne gave property buyers an early Christmas present in December 2014 when he announced far reaching changes to the Stamp Duty Land Tax system.
All property purchasers must pay Stamp Duty Land Tax (SDLT) when they purchase land or property in England, Wales and Northern Ireland over a certain value. The current threshold for residential property is £125,000, i.e. if the price of the property you buy is less than £125,000 there is no SDLT to pay. Once your property purchase has completed and you have received the keys, your solicitor is obliged to file an SDLT return and pay any SDLT due within 30 days.
Before this change, SDLT was charged at one rate on the entire value of the property and there was a big jump in the tax payable when you crossed a threshold. For example if you purchased a property at £249,000 you would be taxed £2,490 (1% of the price) but if you bought at £251,000 you would be taxed £7,530 (3% of the price). In practice this meant properties which had a true value just in excess of a price threshold struggled to reach a fair price as prices were gathered just below each threshold.
The ‘new’ rates apply to completions from 4th December 2014 onwards and each new tax rate is payable on the proportion of the property value which falls within that band. The new rates are:
- up to £125,000 of the purchase price remains zero rated;
- the portion from £125,001 to £250,000 is taxed at 2%;
- the portion from £250,001 – £925,000 is taxed at 5%;
- the portion from £925,001 to £1.5 million is taxed at 10%; and
- the portion above £1.5 million is taxed at 12%
As an example, you would pay £3,750 of tax on a £275,000 house purchase instead of £8,250 under the old regime.
The Law Society estimated that SDLT would be cut for 98% of property purchasers.
If you have any queries about SDLT or legal matters generally, please do contact us.