Stamp Duty Land Tax Reform
What you need to know
The Chancellor presented his Budget to Parliament on Wednesday and the big news was stamp duty land tax, but what is it all about?
Let’s start with the basics:
- Stamp duty land tax is a lump sum tax that you pay when buying property or land in England and Wales over a set threshold.
- Before Wednesday’s Budget, the starting point for paying stamp duty land tax was £125,000 and the rate would vary, increasing in line with the price of the property.
- According to Government figures, the average first-time buyer in the UK was paying around £1,660 in stamp duty.
Although house price rises have been slowing, more and more homebuyers have been facing a charge of stamp duty land tax.
So, what changed with the Budget on Wednesday?
Well, first and foremost, stamp duty land tax has been abolished for first-time buyers who are buying a property valued at £300,000 or less.
For properties costing up to £500,000, there is no stamp duty to be paid on the first £300,000, and the portion between £300,001 and £500,000 is taxed at 5%.
Here's our handy table to show how these changes stack up:
|
HOUSE PRICE |
PRE-BUDGET (approx.) |
POST-BUDGET (approx.) |
|
£125,000 |
£0 |
£0 |
|
£150,000 |
£500 |
£0 |
|
£200,000 |
£1,500 |
£0 |
|
£250,000 |
£2,500 |
£0 |
|
£300,000 |
£5,000 |
£0 |
|
£325,000 |
£6,250 |
£1,250 |
|
£400,000 |
£10,000 |
£5,000 |
|
£500,000 |
£15,000 |
£10,000 |
There are however some potential drawbacks to be borne in mind:
-
The relief only applies for first-time buyers. If a couple are buying, and only one is a first-time buyer, they do not benefit from the tax saving.
- There are concerns that house prices will now rise and will effectively cancel out the benefit of these new measures.
- There is of course no impact on the biggest financial barrier for first-time buyers - the deposit.
- New rates of tax are set to be introduced in Wales from April, which means that the benefit may be short-lived in Wales. The Welsh Government will be introducing a tax with a starting rate of 2.5% on properties valued at more than £150,000. It remains to be seen if this will now be amended to reflect the changes in the Budget.
For further guidance and fee-free initial advice on your next property purchase, please contact our experts on 0800 328 4466.
