There’s no denying that buying a house can be expensive – solicitor’s fees, the cost of a survey, and moving costs all add up.
However, one thing that might cost you less than you’d expected is stamp duty, as new figures reveal that buyers paid an average of £4,500 less in stamp duty over the past year than those in the previous year.
This is due to the Government’s changes to stamp duty, which were revealed in the 2014 Autumn Statement. Let’s take a look at how the changes could affect you if you’re buying property, as well as what the newest reforms mean for you.
What changed with stamp duty?
Stamp duty – also known as stamp duty land tax (SDLT) – is a tax charged on the sale residential property in the UK. It’s charged as a percentage, meaning that if you’re buying a more expensive property, you’ll pay more in stamp duty.
The tax was converted to a more progressive system after last year’s Autumn Statement. This means that now no stamp duty is charged on purchases of property valued up to £125,000. The stamp duty then rises in bands – buyers pay 2% on properties costing between £125,001 and £250,000 for example. The bands for stamp duty now work like income tax, so you don’t have to pay the higher tax for the whole property if your home costs £126,000, for example – you’d only pay 2% of £1,000.
Buyers over the last year have been better off as a whole thanks to the stamp duty reforms, with only those purchasing the most expensive homes having to pay more. Sales of properties over £1.5m were down 20% for the first six months of 2014, and it’s thought that the changes in stamp duty could have been a factor in this.
New stamp duty reforms
In the recent Autumn Statement, the Chancellor announced another change in stamp duty for some properties. Anyone buying property for buy-to-let or as a second home will have to pay 3% more in stamp duty from next April. This applies to the progressive system, so you’d be charged 3% for the first £125,000, 5% between £125,001 and £250,000, and so on.
This reform is designed to discourage buy to let landlords and people buying holiday homes from snapping up properties and so increase the number of houses available for owner occupiers – particularly affordable homes for first time buyers.
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