Stamp duty on home purchases has been completely reformed overnight.
George Osborne announced the reforms during Wednesday’s autumn statement. He claimed that 98% of homeowners in England and Wales would pay less after the changes than they do under the current system.
The current system has been criticised as a “slab tax,” meaning that there can be a sudden increase in stamp duty, when the price goes to the next threshold. For example, someone buying a home for £250,000 would currently pay £2,500 or 1% in stamp duty, when the price goes above the next threshold. But if the price were £1 more, they would pay an extra £5,000 as the duty rises to 3%.
Under the new system, stamp duty will only apply to the amount of the purchase price that falls within the particular threshold. This means that even though the rates appear higher in some cases, the overall charge will mostly be lower.
The new rates will be:
- 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%
On average someone buying a home in England and Wales will pay £4,500 less in stamp duty. All buyers of property up to £937,000 will benefit.
Buyers in the middle of buying a property will be able to choose whether to use the old or the new system.
Professor Michael Ben-Gad of City University predicted: “The short-run impact is likely to be a rise in house prices, because the immediate supply of housing is inelastic and sellers will pocket most of the tax reduction.”
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