In his Autumn Statement, George Osbourne has revealed a substantial reform of Stamp Duty.
It has been announced that Stamp Duty on home purchases is to be reformed from midnight tonight, along the lines of the system due to be introduced in Scotland.
George Osborne revealed in his Autumn Statement that the Stamp Duty reform will benefit 98% of homebuyers, and only those who buy homes worth more than £937,000 will pay more in tax.
According to research from Savills, the substantial reform will mean savings for around three quarters of a million home buyers across England and Wales. By contrast, around 17,000 transactions above the £937,000 threshold will bear an increased Stamp Duty tax burden, undermining the case for any further taxation of high value property.
For a property worth £255,000, which would have previously been subject to a 3% rate on the entire value, will now incur Stamp Duty of just £2,750, a saving of £4,900.
Based on the average value of 2014 sales, a property worth between £1m and £2m will see an increase of £13,500 in Stamp Duty, to an average of £83,500, with the additional liability for a property worth £1.5m equating to £18,750, taking the total to £93,750.
Lucian Cook, Head of Residential Research at Savills said, “The Chancellor is clearly seeking to appeal to the nation’s ingrained aspiration of home ownership.”
“Reforms at the lower end of the Stamp Duty rate bands are well overdue and today’s announcement will be very welcome news for those trying to get on or trade up the housing ladder, particularly if they live in London or the South East. First time buyers and second steppers will find it easier to raise the deposit needed to obtain mortgage finance, removing one of the major hurdles in the current market.
“At the other end of the market, we estimate that around £2.2 billion of Stamp Duty receipts will come from property worth more than £2million. This means that one third of total stamp duty revenues from residential property will be generated by fewer than 5,000 sales – less than half a percent of all transactions.
“This should put an end to any argument that these properties are under-taxed and further significantly undermines any case for a mansion tax.”
THE NEW STAMP DUTY TAX BANDS
Up to £125k – 0%
Up to £250k – 2% on excess over £125k
£250k – £925k – 5% on excess over £250k
£925k – £1.5m – 10% on excess over £925k
Over £1.5m – 12% on excess over £1.5m