Stamp Duty Land Tax: What do the changes mean
Major reforms on Stamp Duty Land Tax have came into force on 4th December 2014. The changes will result in the majority of homebuyers having their Stamp Duty cut.
If your house purchase is £937,500 or less, in most cases you will have less stamp duty to pay. The change aims to align Stamp Duty with other taxes and will be calculated in bands, such as Income Tax, whereas previously it had been calculated at a single rate.
HMRC has an online calculator which is an easy way of establishing your new Stamp Duty payment: http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
The new bands are as follows:
- Purchase price of up to £125,000: No Stamp Duty to pay
- Purchase price of £125,000- £250,000: 2% on the part of the property price within the tax band
- Purchase price of £250,001- £925,000: 5% on the part of the property price within the tax band
- Purchase price of £925,001- £1,500,000: 10% on the part of the property price within the tax band
- Purchase price of £1,500,001 and over: 12% on the part of the property price within the tax band
The Stamp Duty rates are now tapered. If you purchaser a property for say £300,000 you will pay nothing on the first £125,000 and 2% on the sum over that up to £250,000 and 5% on the sum over £250,000. Therefore:
- £300,000 property
- Nothing on the first £125,000
- 2% on the sum between £125,000 and £250,000 (£125,000) = £2,500
- 5% on the sum between £250,000 and £300,000 (£50,000) = £2,500
- Total stamp duty land tax payable £5,000 whereas before it would have been £9,000
The new rules came into effect on 4th December 2014. If you have already exchanged contracts for Completion on or after 4th December, dependent upon your circumstances you have the option to use either the new or the old rules. If you have already completed your purchase before 4th December you will not be entitled to any Stamp Duty tax refund.
Eric Robinson Solicitors have updated its systems in line with the new changes and you can rest assured you will pay the correct rate whenever you matter completes. All future calculations will be generated on the basis of the new rate of tax.
If you would like any further information regarding this or any other issue, please contact us.