This guide is for:
– Prospective buyers of residential property on or after 4th December
Changes to the Stamp Duty Land Tax (SDLT) regime came into effect on 4th December 2014. The Chancellor’s Autumn Statement made alterations to the thresholds for tax charged meaning that an estimated 98% of buyers will save from the changes.
But what are the changes and how will they affect you? This feature will explain the changes that have been made and the impact this will have on your prospective examples.
This article will cover:
• The previous system
• The new tax thresholds
• Who will be affected by the change
• Who will not be affected by the changes
The Previous System
The previous system operated by ‘cliff edge’ increases in price banding meaning that a single rate of tax was applied to any given purchase price. For example, a purchase price of £300,000 would be charged at a flat rate 3%, paying SDLT of £9,000. Here are the previous thresholds and rates:
The New Tax Thresholds
Rather than charging a single rate of tax on a purchase transaction, under the new system, each rate of tax is payable on the portion of the chargeable consideration which falls within the relevant threshold. So, in the same £300,000 example purchase, a purchaser would pay £5,000 – the first £125,000 being tax free, the portion of purchase between £125,000-£250,000 being charged at 2% (£2,500) and the final portion of purchase between £250,000-£925,000 being charged at 5% (another £2,500). Here are the new rates:
Who will be affected by the change
The changes will reportedly allow 98% of homebuyers to make a saving. For some, however, their SDLT liability will have increased following the changes.
Property purchases between £125,001-£937,480 will be better off for the change to SDLT rates. Meanwhile, property purchases of over £937,510 will be progressively worse off for the change. For example, a £1.5 million purchase will now cost an extra £18,750 in SDLT liability (now £93,750, previously £75,000).
Who will not be affected by the change
The changes will affect the majority of property purchasers. Some purchasers will not, however, be affected by the changes:
• Purchasers of properties under £125,000
• Purchasers of commercial properties will be subject to the same rates – no changes have occurred to commercial SDLT rates following the Autumn Statement.
• Certain ‘non-natural person’ purchasers subject to the changes brought in from 20 March 2014 will continue to be charged SDLT at 15% on interests in residential dwellings costing more than £500,000.
Reactive advice from an industry leader…
If you are looking to buy or sell your home or investment property, contact our team of experienced and approachable property lawyers for expert and reliable advice.
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