Yesterday the government announced a complete reform of the way stamp duty is calculated.
This was long overdue and probably the entire industry would agree that the old method was unfair on over 60% of all purchasers. The unlucky sellers who were priced between the £250k-£280k range found it very difficult to achieve above the £250k mark purely because buyers did not want to drop into the 3% stamp duty threshold.
An agents job sometimes became impossible at the negotiating stage.
The new structure of stamp duty is a genuine saver, and a significant one at that. Even though it is somewhat complicated it does work to make the system fairer. The new levels are as follows:-
* No tax on the first £125,000 paid.
* 2% on the portion up to £250,000.
* 5% on the portion up to £925,000.
* 10% on the portion up to £1.5 million.
* 12% on everything over that
So a couple of working examples:
- Client buying at £200,000 will pay no tax on the first £125,000 and 2% on the remaining £75,000 which is £1,500. Under the old setup this would have been 1% of the full £200,000 so £2,000. I.e. the client is £500 better off.
- Client buying at £550,000 will pay no tax on the first £125,000, 2% on the next £125,000 (up to the £250,000 threshold) then 5% on the remaining £300,000 so a total of £17,500. Under the old setup, this would have incurred stamp duty of 4% of the entire balance which was £22,000. i.e. the client is £4,500 better off.
Doing the maths this will represent a cut for 98% of purchases: only properties over £937,000 will incur higher stamp duty.
This is a clear voting policy of the government but one that could just have a real impact!