As of 4th December 2014 new rates of Stamp Duty Land Tax payable on residential transactions (SDLT) were introduced , which should for most home buyers significantly reduce the amount of Stamp Duty payable on a purchase.
As before, payment of SDLT only applies for property purchases over £125,000 as anything under that is exempt from SDLT.
Under the old rules anyone purchasing a property over £125,000 had to pay 1% SDLT on the full value of the property. This increased to 3% on purchases over £250,000 and then 4% on purchase over £500,000.
Under the new rules home buyers will only pay SDLT on the proportion of the value of the property exceeding £125,000 but the rate has increased to 2%. For example if a purchaser was buying a property for £150,000 under the old rules they would have to pay £1,500 in SDLT being 1% of the whole value of the property. Under the new rules they would pay £500, being 2% applied to the value over £125,000, ie, £25,000. Thereby creating a saving of £1,000
A new rate now also applies to purchases over £250,000 as they will be taxed at 2% +5% for the proportion of the property’s value that exceeds £125,000 and £250,000 respectively, ie, for a house valued at £350,000 tax would be calculated as follows:
Up to £125,000 = 0%
£125,000 – £250,000 = 2%
£250,000 – £350,000 = 5%
Leading to SDLT of £7,500 being paid. This creates a saving of £2,500 as under the old rules tax would have been paid at 3% on the full value ie, £10,500.
It is believed therefore that SDLT will reduce for 98% of people who pay it.
Please note that these rules only relate to residential properties, and will not apply to commercial property or land.
If you require advice on SDLT or on any other aspect of a sale or purchase please contact us and ask for one of our conveyancers.