Buying a house is about to become a great deal cheaper for most, however more expensive for those houses over £937,500. The government have changed the way stamp duty land tax is calculated. It will now work in a similar way to income tax with each rate applying to the applicable band within a transaction (i.e. you only pay 2% on the amount between £125k and £250k).
Previously, if you bought a house at £250,000 you paid 1% tax on the full amount (£2,500), but if you bought the same house for £250,001 you would pay 3% on the full amount (£7,500). This created a false market around the various “stamp duty thresholds” that has generally been conidered bad for the market.
Now, the first £125,000 for all transactions will be free from stamp duty, and the other rates have changed too. Here are the new rates:
|£0 – £125,000
|£125,001 – £250,000
|£250,001 – £925,000
|£925,001 – £1.5 million
|Over £1.5 million
So a house costing £150,000 would no be taxed £500.
(0% of the first £125k plus 2% of the remaining £25k)
A house costing £265,000 would be taxed £3,250 (It would have previously cost £7,950)
A house costing £650,000 would be taxed £22,500 (It would have previously cost £26,000)
A house costing £925,000 would be taxed £36,250 (It would have previously cost £37,000)
The tax would be the same as it was previously at £937,500 (£37,500). Over this, you will be paying more by the new rates. A £2 Million house will now pay £153,750; nearly 54% more.
In our view, this is a far better way of managing the tax and a better method of taxation than the so called “mansion tax”.