Stamp Duty – Major Changes


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:

Purchase Price % rate
£0 – £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1.5 million 10%
Over £1.5 million 12%

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”.


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