Stamp Duty Reforms – The New Facts

George Osborne, the Chancellor of the Exchequer, in his autumn statement on the 3 December 2014 made unexpected and radical reforms to the Stamp Duty system, these new rules coming into effect from midnight of that day.

What is Stamp Duty ?

Stamp Duty Land Tax, to give it its full name, is a tax you pay when you buy a house. The tax is calculated according to the purchase price of the property.

What are the changes ?

The changes apply to you if you are buying a home in the UK for over £125,000. These changes do not affect commercial properties.

Under the old rules you would have paid tax at a single rate on the entire purchase price.

Between £125,001 – £250,000  1%
Between £250,001 – £500,000  3%
Between £500,001 -£1m  4%
Between £1m -£2m  5%
Above £2 m  7%

Under the new rules you only pay the rate of tax on the part of the property within each tax band just like income tax. Below are the new rates.                            

Between £0 – £125,000 0%
Between £125,001- £250,000 2%
Between £250,001 – £925,000 5%
Between £925,001-31,500,000 10%
Between £1,500,001-over 12%

Therefore if you bought a house for £150,000 under the old regime you would have paid 1% of tax on the whole amount- a total of £1500 whereas buying the same house under the new rules means you will not pay any tax on the first £125,000 and 2% on the remaining £25,000. This works out at £500, a saving of £1000. If you were buying a house at  £300,000 before 4 December 2014 the Stamp Duty would have been  £9000 but now there would be no tax to pay on the first £125,000 , then 2% on the next £125,000 (£2500) and 5% on the last £50,000 (£2500) making a total of £5000.

Is this good news for everyone?

HM Treasury advises that Stamp Duty will be cut for 98% of people who pay it. However, anyone spending more than £937,000 will face a higher bill. If you are purchasing a home for £2.1m you will be liable for tax of £165,750 under the new regime versus £147,000 previously.

Changes in Scotland

In Scotland the new rates will apply only until the 1 April 2015 when the Land and Buildings Tax replaces Stamp Duty. This will also be calculated like income tax. There will be a tax free allowance of £145,000 on each transaction. Above that there will three bands:

Between £145,001 – £250,000 2%
Between £250.001 – £325,000 5%
Between £325,001- £750,000 10%
£750,000 and over 12%

If you would like to discuss the impact of this new land tax please contact me on 0141-552-3422 or by email and I will do my best to help.

This entry was posted in Legal and tagged , , by Ross Leatham. Bookmark the permalink.

About Ross Leatham

Ross graduated from the University of Glasgow in 2004 having spent 6 months of his studies as an international student at the University of Tilburg. He commenced his traineeship with Mitchells Roberton in 2005 and has been with the firm ever since. He is an experienced solicitor dealing in the purchase and sale of both commercial and residential property, acquisition and disposal of businesses, commercial leasing and property finance. He has acted for a wide range of clients including accountants, further educational establishments, hotels, restaurants, veterinary surgeons, dentists and charities. Ross firmly believes that each client is not just a case and he always takes the time to foster a genuine engagement with his clients to best understand their needs in order to provide focused commercial advice and pragmatic solutions to their problems. Ross only wishes he could find as an effective solution to enhance the performance of his beloved hockey team, East Kilbride. Ross is married.

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