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New Stamp Duty: Tiers of Joy for Everyone (Well Almost)

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We’ve written a few times about the inequity of the Stamp Duty tiers and calculation most recently back in August in Stamp Duty (Where Does All the Money Go?)

Why does Stamp Duty need to be so expensive?

As part of the moaning classes (generally Conveyancing Solicitors and Estate Agents) we are now able to exchange our frowns for tiers (sic) of joy.

Not unbridled joy; as Stamp Duty is still a tax on buying a new home for you and your family.

But credit where credit is due:  a Hurrah but not perhaps three cheers

Back in the Day: How Stamp Duty used to be calculated

Stamp Duty was not payable on houses up to and including £125,000, but kicked in at just a pound over that number.

And when we say kicked in, it kicked in, at the full amount over the threshold.

The thresholds were:

  • 1% up to £250,000
  • 3% between £250,001 and £500,000
  • 4% between £500,001 and £1,000,000
  • 5% between £1,000,001 and £2,000,000
  • 7% over £2,000,001.

As an example; on a house costing £350,000 the Stamp Duty was 3% of the whole purchase price which amounted to £10,500.

Distorted Pricing at the Thresholds

Try selling before this week a property at £260,000 or £510,000.

It just didn’t happen.

Buyers would simply not be willing to pay an enhanced Stamp Duty premium for the privilege:

            Stamp Duty on £250,000 =£2500; Stamp Duty on £260,000 = £7800

            Stamp Duty on £500,000 = £15,000; Stamp Duty on £510,000 = £20,400

The result was you either had to sell at below the previous threshold or hold out for a significantly higher asking price.

The New Stamp Duty: How it is calculated

Stamp Duty is still inert at property up to £125,000.  No Stamp Duty to pay.

But now you will only pay a tiered rate and not a slab rate of tax.

The new Stamp Duty Land Tax bands are;

  • 0% up to £125,000
  • 2% between £125,001 and £250,000
  • 5% between £250,001 and £925,000
  • 10% between £925,001 and £1.5 million
  • 12% over £1.5 million

So using our example above, of a house or flat costing £350,000;

  • The first £125,000 is exempt
  • The amount between £125,001 and £250,000 is taxed at 2% (£2,500)
  • The amount between £250,001 and £350,000 is taxed at 5% (£5,000)

This results in a Stamp Duty cost of £7,500 – a saving of £3,000

These new rules were effective from 4th December.

If you are particularly masochistic and have already exchanged contracts but not yet completed you can still opt to pay under the old Stamp Duty rules.

LOL I think is what text messaging aficionados would respond to that.

Band Aid

The changes in Stamp Duty bands, and how the tax is now calculated within them, means that most people will save tax.

98% of Buyers in fact according to the Chancellor.

The outcast 2% will start to feel a metaphorical pinch (and pay more tax) at property purchased over £937,500 but intriguingly still a saving for buyers between £1,000,000 and £1,124,999.

Stamp Duty has undoubtedly restricted some movement in the Housing Market.

Any help with reducing tax and making moving home more affordable for more people is a good thing.

And guess what we’ve updated our free online Conveyancing Calculator for you to number crunch the next Stamp Duty fees.

Tiers of Stamp Duty Joy!


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